Father
Professional
- Messages
- 2,602
- Reaction score
- 850
- Points
- 113
What do the words "issuer", "broker", "depository" mean, and how is trading on the stock exchange carried out?
“The stock market closed trading with multidirectional growth. The RTS index showed a decline: it lost 1.35% and closed at 737.35 points. And the MICEX index added 0.49% and reached 1647.49 points, ”we hear on TV and immediately rush to change the channel. It seems that the stock market is very difficult and boring, only smart guys in blue shirts are engaged in investing, and the stock exchange is a place where everyone is cheating. After all, we saw something like that in the films about Wall Street.
Let's see which of our typical representations is true and which is fiction. How does the stock exchange actually work and where should you start if you want to invest money in securities?
What is the stock market and the stock exchange?
The stock market is a market for securities: stocks, bonds, investment shares.
The easiest way to conclude transactions for the purchase and sale of such securities is on a specially organized trading platform - the stock exchange. It makes it possible to buy securities reliably and quickly and sell them at a fair, that is, market price.
There are professional participants on the exchange - intermediaries between buyers and sellers. These are banks, brokers, investment companies. It is intermediaries who provide access for private investors to the exchange market. All relations between the participants and the mechanisms of the exchange itself are regulated by the Federal Law "On the Securities Market".
It is possible to buy and sell some types of securities outside the exchange, this method of trading is called OTC. But, firstly, it is not always possible to do without intermediaries at all: outside the exchange, securities are usually not sold literally from hand to hand - those who issued them to those who want to invest. The organizers of transactions on the OTC market are the same brokers, banks, and so on.
Secondly, OTC trading is associated with great risks: in this case, transactions are not controlled by anyone. This means that you are not protected from fraudsters and are at high risk of your money. Therefore, if you want to invest money in securities, it is worth doing it through the stock exchange.
“Somehow my brother got a call from an unknown number and was offered to do stock trading. These, as they introduced themselves, “brokers” promised to study at the academy, the only requirement was to open an account. The conditions are as follows: the money is in a bank in Latvia, you can withdraw it at any time. My brother is a vigilant man, but they managed to persuade him ".
Be vigilant, do not step on someone else's rake!
Many people think of the stock exchange as a noisy place where people with three handsets in hand shout their bets, but those days are long gone. Now almost all the activity of the exchange is conducted in electronic mode.
The main exchanges are the Exchange and the International Mercantile Exchange. On the Exchange, you can buy and sell not only securities, but also foreign currency, commodities (precious metals, grain, sugar), as well as derivative financial instruments - futures and options - for various assets (securities, currencies, commodities). The Exchange trades in raw materials (oil and oil products, timber, gas, energy, agricultural products) and special derivatives that allow you to conclude more profitable transactions for such a commodity - futures.
As we have already found out, securities are traded on the exchange. They don't appear out of nowhere, they are issued by issuers.
Why and how are securities issued?
The issuer is the one who issues the securities. The issuer can be a company, a state or its separate region and even a city.
Securities are issued to attract money. Before issuing, the issuer estimates how much money it needs and in what form. A company can simply "borrow" money from future buyers of securities, promising them to pay interest in the future - then it issues bonds, in fact, IOUs. And you can get money by offering buyers to become co-owners of the company - to divide its capital into micro-shares and sell them. These will be promotions.
Then the company determines the parameters of the securities: their number, face value, that is, the cost of one security, its validity period. After that, the state registration of the issue takes place: an entry is made about this paper in a special register.
For example, a company wants to attract additional investment and issues shares. By purchasing them, you become the owner of a share in the company and receive the right to a part of its profits, which is distributed among all shareholders (the so-called dividends), and the right to vote at the shareholders' meeting. Or a company or state (region, city) issues bonds in order to borrow some money on the market and after a while give it back with interest for use.
Registered securities are placed on an exchange where investors can purchase them.
How to become an investor?
An investor is someone who invests their money to make a profit.
On the exchange, an investor buys and sells securities. But buying them directly from the issuer or selling them to another investor will not work. To conclude transactions, the investor needs to open a brokerage account. This is a special account with which you can buy and sell securities, as well as see the entire history of transactions. Your official representative on the exchange, a broker, will work with such an account.
Who is a broker and how to work with him?
A broker is an intermediary between an investor and an issuer, a professional market participant who transacts with securities for the investor.
Most often, the functions of intermediaries are performed by private brokerage companies and banks. To work, they must have a special license issued by the Bank (until 2013 they were issued by the Federal Service for Financial Markets). You can check if the broker you have chosen has a license in the Directory of Financial Market Participants.
You conclude a service agreement with a broker and open a brokerage account. The broker performs operations on your behalf. Money for the purchase and the broker's commission are debited from the brokerage account - a fee for helping you to complete an operation on the exchange. In addition to the trades that the broker will make, he calculates and withholds your income tax - 13%.
You can communicate with a broker via the Internet if you install a special program for yourself - a trading terminal. Or you can give instructions by phone, for this you will be given a special card with codes. The broker calls the number of the cell in the card, you erase the protective layer and name the combination of numbers printed in this cell.
Working with a broker, you need to independently develop an investment strategy. That is, only you will make decisions about what and when to buy and sell. The broker does not bear responsibility for the risks and transactions, he is just your “hands” in the securities market - he carries out your orders. Therefore, you will need to thoroughly understand how the securities market works, and constantly monitor the situation, analyze information and make decisions.
If you have little experience and are not sure about your decisions, you can find another professional intermediary who can help you decide which securities and when to buy and sell - a trustee.
Who is a trustee and how to work with him?
A trustee is an organization that you entrust to manage a package of securities according to a predetermined and approved strategy.
She must also have a special license from the Bank, you can check it in the Directory of Financial Market Participants.
So, you draw up a trust management agreement and discuss in advance the strategy of behavior on the exchange. For example, you want your investment portfolio to consist only of bonds of the largest and most reliable companies with stable income indicators - with an interest rate of at least 3%. You define these conditions, and based on them, the manager will decide when and what securities to buy and sell.
Advantage of trust management: you do not need to constantly monitor the situation on the exchange, the trust manager does it for you. At the same time, your income will depend on his decisions, right or wrong. Therefore, it makes sense to understand how the stock market works - in order to determine the strategy.
I buy and sell securities - is this somehow taken into account?
There is a strict procedure on the exchange: all buying and selling operations are recorded so that all market participants know who owns this or that security. Once the investor has bought the shares of the issuer, the details of the transaction are received by the registrar and custodian.
Registrar is a special company that maintains registers where all shareholders are registered.
The register is divided into many personal accounts, and they indicate which of the shareholders has how many shares. Such accounts help issuers to communicate important news to shareholders, such as general meeting dates, and to calculate dividends. The registrar is also a licensed market participant; you can check his license in the reference book.
For an investor, securities are kept by a depository - a company that stores and records assets.
Depositories must also have a special license from the Bank of Russia, which can also be checked in the reference book .
In the depository company, a special depo account (depository account) is opened for the client. It records the client's securities and has records of all transactions - you always know how many securities you have and what they are. When you sell securities, the depositary becomes the guarantor that you are the owner of the paper, that is, you have the rights to it.
Now imagine how many operations are performed on the market in one second, how many active participants there are, each of whom is involved in many processes. In order for the system to work smoothly and in accordance with the law, a regulator is needed.
Who keeps order on the stock market and stock exchange?
A regulator is an organization that makes sure that everything happens legally on the stock exchange.
In the market, these functions are performed by the Bank. It issues special licenses to all professional market participants. Don't trust your money and assets to unlicensed intermediaries. The regulator will not be able to protect you from the illegal actions of such companies, because he has no leverage over them. In this case, you will only have to contact law enforcement agencies.
I want to trade on the stock exchange. Where to begin?
It is important to remember that investments in securities can always result in losses. Therefore, it is worth becoming an investor only if you have free funds and are willing to risk them.
Buying and selling securities is not a casino or a lottery, but a scrupulous calculation. How not to burn out and choose the safest strategy of behavior on the stock exchange, read the text "What a novice investor needs to know".
A free online course "Investor's Way" from the Exchange will help you to study the risks and understand the nuances of investing.
“The stock market closed trading with multidirectional growth. The RTS index showed a decline: it lost 1.35% and closed at 737.35 points. And the MICEX index added 0.49% and reached 1647.49 points, ”we hear on TV and immediately rush to change the channel. It seems that the stock market is very difficult and boring, only smart guys in blue shirts are engaged in investing, and the stock exchange is a place where everyone is cheating. After all, we saw something like that in the films about Wall Street.
Let's see which of our typical representations is true and which is fiction. How does the stock exchange actually work and where should you start if you want to invest money in securities?
What is the stock market and the stock exchange?
The stock market is a market for securities: stocks, bonds, investment shares.
The easiest way to conclude transactions for the purchase and sale of such securities is on a specially organized trading platform - the stock exchange. It makes it possible to buy securities reliably and quickly and sell them at a fair, that is, market price.
There are professional participants on the exchange - intermediaries between buyers and sellers. These are banks, brokers, investment companies. It is intermediaries who provide access for private investors to the exchange market. All relations between the participants and the mechanisms of the exchange itself are regulated by the Federal Law "On the Securities Market".
It is possible to buy and sell some types of securities outside the exchange, this method of trading is called OTC. But, firstly, it is not always possible to do without intermediaries at all: outside the exchange, securities are usually not sold literally from hand to hand - those who issued them to those who want to invest. The organizers of transactions on the OTC market are the same brokers, banks, and so on.
Secondly, OTC trading is associated with great risks: in this case, transactions are not controlled by anyone. This means that you are not protected from fraudsters and are at high risk of your money. Therefore, if you want to invest money in securities, it is worth doing it through the stock exchange.
“Somehow my brother got a call from an unknown number and was offered to do stock trading. These, as they introduced themselves, “brokers” promised to study at the academy, the only requirement was to open an account. The conditions are as follows: the money is in a bank in Latvia, you can withdraw it at any time. My brother is a vigilant man, but they managed to persuade him ".
Be vigilant, do not step on someone else's rake!
Many people think of the stock exchange as a noisy place where people with three handsets in hand shout their bets, but those days are long gone. Now almost all the activity of the exchange is conducted in electronic mode.
The main exchanges are the Exchange and the International Mercantile Exchange. On the Exchange, you can buy and sell not only securities, but also foreign currency, commodities (precious metals, grain, sugar), as well as derivative financial instruments - futures and options - for various assets (securities, currencies, commodities). The Exchange trades in raw materials (oil and oil products, timber, gas, energy, agricultural products) and special derivatives that allow you to conclude more profitable transactions for such a commodity - futures.
As we have already found out, securities are traded on the exchange. They don't appear out of nowhere, they are issued by issuers.
Why and how are securities issued?
The issuer is the one who issues the securities. The issuer can be a company, a state or its separate region and even a city.
Securities are issued to attract money. Before issuing, the issuer estimates how much money it needs and in what form. A company can simply "borrow" money from future buyers of securities, promising them to pay interest in the future - then it issues bonds, in fact, IOUs. And you can get money by offering buyers to become co-owners of the company - to divide its capital into micro-shares and sell them. These will be promotions.
Then the company determines the parameters of the securities: their number, face value, that is, the cost of one security, its validity period. After that, the state registration of the issue takes place: an entry is made about this paper in a special register.
For example, a company wants to attract additional investment and issues shares. By purchasing them, you become the owner of a share in the company and receive the right to a part of its profits, which is distributed among all shareholders (the so-called dividends), and the right to vote at the shareholders' meeting. Or a company or state (region, city) issues bonds in order to borrow some money on the market and after a while give it back with interest for use.
Registered securities are placed on an exchange where investors can purchase them.
How to become an investor?
An investor is someone who invests their money to make a profit.
On the exchange, an investor buys and sells securities. But buying them directly from the issuer or selling them to another investor will not work. To conclude transactions, the investor needs to open a brokerage account. This is a special account with which you can buy and sell securities, as well as see the entire history of transactions. Your official representative on the exchange, a broker, will work with such an account.
Who is a broker and how to work with him?
A broker is an intermediary between an investor and an issuer, a professional market participant who transacts with securities for the investor.
Most often, the functions of intermediaries are performed by private brokerage companies and banks. To work, they must have a special license issued by the Bank (until 2013 they were issued by the Federal Service for Financial Markets). You can check if the broker you have chosen has a license in the Directory of Financial Market Participants.
You conclude a service agreement with a broker and open a brokerage account. The broker performs operations on your behalf. Money for the purchase and the broker's commission are debited from the brokerage account - a fee for helping you to complete an operation on the exchange. In addition to the trades that the broker will make, he calculates and withholds your income tax - 13%.
You can communicate with a broker via the Internet if you install a special program for yourself - a trading terminal. Or you can give instructions by phone, for this you will be given a special card with codes. The broker calls the number of the cell in the card, you erase the protective layer and name the combination of numbers printed in this cell.
Working with a broker, you need to independently develop an investment strategy. That is, only you will make decisions about what and when to buy and sell. The broker does not bear responsibility for the risks and transactions, he is just your “hands” in the securities market - he carries out your orders. Therefore, you will need to thoroughly understand how the securities market works, and constantly monitor the situation, analyze information and make decisions.
If you have little experience and are not sure about your decisions, you can find another professional intermediary who can help you decide which securities and when to buy and sell - a trustee.
Who is a trustee and how to work with him?
A trustee is an organization that you entrust to manage a package of securities according to a predetermined and approved strategy.
She must also have a special license from the Bank, you can check it in the Directory of Financial Market Participants.
So, you draw up a trust management agreement and discuss in advance the strategy of behavior on the exchange. For example, you want your investment portfolio to consist only of bonds of the largest and most reliable companies with stable income indicators - with an interest rate of at least 3%. You define these conditions, and based on them, the manager will decide when and what securities to buy and sell.
Advantage of trust management: you do not need to constantly monitor the situation on the exchange, the trust manager does it for you. At the same time, your income will depend on his decisions, right or wrong. Therefore, it makes sense to understand how the stock market works - in order to determine the strategy.
I buy and sell securities - is this somehow taken into account?
There is a strict procedure on the exchange: all buying and selling operations are recorded so that all market participants know who owns this or that security. Once the investor has bought the shares of the issuer, the details of the transaction are received by the registrar and custodian.
Registrar is a special company that maintains registers where all shareholders are registered.
The register is divided into many personal accounts, and they indicate which of the shareholders has how many shares. Such accounts help issuers to communicate important news to shareholders, such as general meeting dates, and to calculate dividends. The registrar is also a licensed market participant; you can check his license in the reference book.
For an investor, securities are kept by a depository - a company that stores and records assets.
Depositories must also have a special license from the Bank of Russia, which can also be checked in the reference book .
In the depository company, a special depo account (depository account) is opened for the client. It records the client's securities and has records of all transactions - you always know how many securities you have and what they are. When you sell securities, the depositary becomes the guarantor that you are the owner of the paper, that is, you have the rights to it.
Now imagine how many operations are performed on the market in one second, how many active participants there are, each of whom is involved in many processes. In order for the system to work smoothly and in accordance with the law, a regulator is needed.
Who keeps order on the stock market and stock exchange?
A regulator is an organization that makes sure that everything happens legally on the stock exchange.
In the market, these functions are performed by the Bank. It issues special licenses to all professional market participants. Don't trust your money and assets to unlicensed intermediaries. The regulator will not be able to protect you from the illegal actions of such companies, because he has no leverage over them. In this case, you will only have to contact law enforcement agencies.
I want to trade on the stock exchange. Where to begin?
It is important to remember that investments in securities can always result in losses. Therefore, it is worth becoming an investor only if you have free funds and are willing to risk them.
Buying and selling securities is not a casino or a lottery, but a scrupulous calculation. How not to burn out and choose the safest strategy of behavior on the stock exchange, read the text "What a novice investor needs to know".
A free online course "Investor's Way" from the Exchange will help you to study the risks and understand the nuances of investing.
