chapter 2 Securities market

Securities market Chapter 06/08/2011 B02003 - securities market Chapter 2: Securities market 2.1 The history of formation and development of securities market 2.2 Functions and roles of securities market 2.3 Classification of securities market 2.4 Operation principles of securities market 2.5 Participants 06/08/2011 B02003 - securities market 2.1 The history of formation and development of securities market • The history of formation and development of securities market in the world • Process of formation and development of securities market in Vietnam 06/08/2011 B02003 - securities market 2.2 Functions and roles of securities market • • • • • Mobilizing/raising capital for economics Assessment the business value Providing investment environment Guaranteeing the liquidity Giving the government a good chance to carry out the macroeconomic policy 06/08/2011 B02003 - securities market 2.3 Classification of securities market Criteria: • Based on the turnover process of securities • Based on the mode of the market operation • Based on the Commodities dealing in the market 06/08/2011 B02003 - securities market • Based on the turnover process of securities – Primary market – Secondary market • Based on the mode of the market operation – Centralized market (stock exchange) – Over-the-counter market • Based on the commodities dealing in the market – Equity market (stock market) – Bond market – Derivatives market 06/08/2011 B02003 - securities market Primary market – The primary market refers to the market where new issues (stocks and bonds not sold before) are sold – Companies, governments and other groups obtain financing through debt or equity based securities – Primary markets are facilitated by underwriting groups, which consist of investment banks that will set a beginning price range for a given security and then oversee its sale directly to investors 06/08/2011 B02003 - securities market Secondary market • A secondary market is the market in which assets are traded after they have been sold through the primary market In this market, investors trade directly with each other through an exchange 06/08/2011 B02003 - securities market Centralized market (stock exchange) • A financial market structure that consists of having all orders routed to one central exchange with no other competing market The quoted prices of the various securities listed on the exchange represent the only price that is available to investors seeking to buy or sell the specific asset 06/08/2011 B02003 - securities market Over-the-counter market • A decentralized market of securities not listed on an exchange where market participants trade over the telephone, facsimile or electronic network instead of a physical trading floor There is no central exchange or meeting place for this market 06/08/2011 B02003 - securities market Bond market • The environment in which the issuance and trading of debt securities occurs 06/08/2011 B02003 - securities market The difference between the bond market and the stock market • The bond market is where investors go to trade (buy and sell) debt securities, prominently bonds • The stock market is a place where investors go to trade (buy and sell) equity securities like common stocks and derivatives (options, futures etc) 06/08/2011 B02003 - securities market Derivatives market • A security whose price is dependent upon or derived from one or more underlying assets The derivative itself is merely a contract between two or more parties Its value is determined by fluctuations in the underlying asset • The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes  Derivatives market is the environment in which the trading of derivatives occurs 06/08/2011 B02003 - securities market 2.4 Operation principles of securities market • • • • • Competition principle Natural justice principle Disclosure principle Intermediate principle Centralized principle 06/08/2011 B02003 - securities market 2.5 Participants • • • • Issuing organizations Investors (individual and organization) Brokers and stock dealers Market support organizations 06/08/2011 B02003 - securities market Participants directly organize the operation • • • • • • Stock exchange The Securities Depository Centre Nominated bank for payment Securities companies Commercial banks The Associations of financial Investors 06/08/2011 B02003 - securities market The Stock Exchange • Definition of stock exchange • Operational organization model of stock exchange 06/08/2011 B02003 - securities market Definition of Stock exchange • The Stock Exchange is the Organization, which organizes the securities trading market for securities listed in it 06/08/2011 B02003 - securities market Operational organization model of stock exchange • • • • Club and association model Joint stock company Joint stock with government participation 100% state-own enterprise 06/08/2011 B02003 - securities market Organization model of stock exchange in Vietnam • Organizational model • Organizational structure (institutional framework) 06/08/2011 B02003 - securities market Institutional framework of stock exchange BOARD OF DIRECTORS BOARD OF MANAGERS Transactions management 06/08/2011 Listing management Clearance section Member management Other competencies B02003 - securities market Finance accounting IT Personnel department OTC Market • The Over – The – Counter Market is not a centralized exchange, but a network of security dealers who use an electronic system to quote price at which they will buy and sell shares 06/08/2011 B02003 - securities market TASK FOR CHAPTER Write about: • OTC Market in Vietnam • OTC market in the other countries 06/08/2011 B02003 - securities market Tasks to prepare for the chapter • Read the Securities Law of Vietnam • Go to the HOSE’s website http://www.hsx.vn/ and HNX’s website http://hnx.vn to find the regulations (in English) 06/08/2011 B02003 - securities market Video to learn Financial English at home • Financial English Vocabulary Lesson for ESL (YOU.TUBE – Video VOCAB.) 06/08/2011 B02003 - securities market .. .Chapter 2: Securities market 2. 1 The history of formation and development of securities market 2. 2 Functions and roles of securities market 2. 3 Classification of securities market 2. 4 Operation... 06/08 /20 11 B 020 03 - securities market TASK FOR CHAPTER Write about: • OTC Market in Vietnam • OTC market in the other countries 06/08 /20 11 B 020 03 - securities market Tasks to prepare for the chapter. .. 06/08 /20 11 B 020 03 - securities market 2. 5 Participants • • • • Issuing organizations Investors (individual and organization) Brokers and stock dealers Market support organizations 06/08 /20 11 B 020 03