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Encyclopedia > Security (finance)
Securities

Securities
Bond
Equities
Investment Fund
Derivatives
Structured finance
Agency Securities
Image File history File links Vereinigte_Ostindische_Compagnie_bond. ... For alternative meanings, see bond (a disambiguation page). ... Ownership equity, commonly known simply as equity, also risk or liable capital, is a financial term for the difference between a companys assets and liabilities -- that is, the value that accrues to the owners (sole proprieter, partners, or shareholders). ... Funds financial information A collective investment scheme is a way of investing money with a large number of people to participate in a wider range of investments that may not be feasible for an individual investor hence many investors share the costs of doing so. ... Derivatives traders at the Chicago Board of Trade. ... Structured finance describes any non-standard way of raising money. ... This article or section does not cite its references or sources. ...

Markets
Bond market
Stock market
Futures market
Foreign exchange market
Commodity market
Spot market
Over-the-counter Market (OTC) The bond market, also known as the debit, credit, or fixed income market, is a financial market where participants buy and sell debt securities usually in the form of bonds. ... A stock market is a market for the trading of company stock, and derivatives of same; both of these are securities listed on a stock exchange as well as those only traded privately. ... A futures contract is a form of forward contract, a contract to buy or sell an asset of any kind at a pre-agreed future point in time, that has been standardised for a wide range of uses. ... The foreign exchange (currency or forex or FX) market exists wherever one currency is traded for another. ... This article is in need of attention. ... Template:The Spot Market The Spot Market or Cash Marketis a commodities or securities market in which goods are sold for cash and delivered immediately. ... Over-the-counter (OTC) trading is to trade financial instruments such as stocks, bonds, commodities or derivatives directly between two parties. ...

Bonds by coupon
Fixed rate bond
Floating rate note
Zero coupon bond
Inflation-indexed bond
Commercial paper
Perpetual bond
In finance, a fixed rate bond is a bond with a fixed coupon (interest) rate, as opposed to a floating rate note. ... Floating rate notes (FRNs) are bonds that have a variable coupon, equal to a money market reference rate, like LIBOR or federal funds rate, plus a spread. ... Zero coupon bonds are bonds which do not pay periodic coupons, or so-called interest payments. ... Inflation-indexed bonds (also known as linkers) are bonds whose principal are indexed to inflation, cutting out inflation risk. ... Commercial paper is a money market security issued by large banks and corporations. ... A perpetual bond, which is also known as a Perpetual or just a Perp, is a bond with no maturity date. ...

Bonds by issuer
Corporate bond
Government bond
Municipal bond
Sovereign bonds
A corporate bond is a bond issued by a corporation. ... A government bond is a bond issued by a national government denominated in the countrys own currency. ... In the United States, a municipal bond or muni is a bond issued by a state, city or other local government, or their agencies. ... A sovereign bond is a bond issued by a national government as opposed to a municipal bond which is issued by a subdivision of a national government. ...

Equities (Stocks)
Stock
Share
IPO
Short Selling
For other uses, see Stock (disambiguation). ... This article or section does not adequately cite its references or sources. ... “IPO” redirects here. ... In finance, short selling or shorting is a way to profit from the decline in price of a security, such as stock or a bond. ...

Investment Funds
Mutual fund
Index Fund
Exchange-traded fund (ETF)
Closed-end fund
Segregated fund
This article deals with U.S. mutual funds. ... An index fund or index tracker is a collective investment scheme that aims to replicate the movements of an index of a specific financial market, or a set of rules of ownership that are held constant, regardless of market conditions. ... Exchange-traded funds (or ETFs) are open ended mutual funds that can be traded at any time throughout the course of the day. ... A closed-end fund is a collective investment scheme with a limited number of shares. ... Segregated Funds are a classification of funds administered by an insurance company in the form of individual, variable life insurance contracts offering certain guarantees to the policyholder such as reimbursement of capital upon death. ...

Structured Finance
Securitization
Asset-backed security
Collateralized debt obligation
Collateralized mortgage obligation
Credit-linked note
Mortgage-backed security
Commercial mortgage-backed security
Residential mortgage-backed security
Unsecured bond
Agency Securities
This article is about securitization in finance. ... An asset-backed security is a type of bond or note that is based on pools of assets, or collateralized by the cash flows from a specified pool of underlying assets. ... Collateralized debt obligations (CDOs) are a type of asset-backed security or structured finance product. ... A Collateralized Mortgage Obligation (CMO) is a type of Mortgage Backed Security, which has been divided up into tranches. ... A credit linked note is a form of funded credit derivative. ... A mortgage-backed security (MBS) is an asset-backed security whose cash flows are backed by the principal and interest payments of a set of mortgage loans. ... Commercial mortgage-backed securities (CMBS) are a type of bond commonly issued in American security markets. ... Residential mortgage-backed securities (RMBS) are a type of bond commonly issued in American security markets. ... Unsecured debt is a financial term that refers to any type of debt that is not collateralized by any specified assets in the event of default. ... This article or section does not cite its references or sources. ...

Derivatives
Options
Warrants
Futures
Forwards
Swaps
Credit Derivatives
Hybrid Securities
In finance options are types of derivative contracts, including call options and put options, where the future payoffs to the buyer and seller of the contract are determined by the price of another security, such as a common stock. ... For other uses of the term Warrant, see Warrant (disambiguation) A warrant is a security that entitles the holder to buy or sell a certain additional quantity of an underlying security. ... In finance, a futures contract is a standardized contract, traded on a futures exchange, to buy or sell a certain underlying instrument at a certain date in the future, at a specified price. ... This article does not cite any references or sources. ... For the Thoroughbred horse racing champion, see: Swaps (horse). ... // A credit derivative is a financial instrument or derivative (finance) whose price and value derives from the creditworthiness of the obligations of a third party, which is isolated and traded. ... Definition A hybrid security, as the name implies, is a security that combines two or more different financial instruments. ...

For security (collateral), the legal right given to a creditor by a borrower, see security interest A creditor is a party (e. ... In finance, a Borrower is being referred to as the person or company which a person or company has lent financial funds (money) to (the Lender. ... A security interest is a property interest created by agreement or by operation of law over assets to secure the performance of an obligation (usually but not always the payment of a debt) which gives the beneficiary of the security interest certain preferential rights in relation to the assets. ...


A security is a fungible, negotiable instrument representing financial value. Securities are broadly categorized into debt securities, such such as bonds and debentures, and equity securities, e.g. common stocks. The company or other entity issuing the security is called the issuer. What specifically qualifies as a security is dependent on the regulatory structure in a country. For example private investment pools may have some features of securities, but they may not be registered or regulated as such if they meet various restrictions. Fungibility is the degree to which all instances of a given commodity are considered interchangeable. ... A negotiable instrument is a specialised type of contract for the payment of money which is unconditional and capable of transfer by negotiation. ... This article does not cite any references or sources. ... For alternative meanings, see bond (a disambiguation page). ... In finance, a debenture is a long-term debt instrument used by governments and large companies to obtain funds. ... For other uses, see Stock (disambiguation). ... Common stock, also referred to as common shares, are, as the name implies, the most usual and commonly held form of stock in a corporation. ...


Securities may be represented by a certificate or, more typically, by an electronic book entry. Certificates may be bearer, meaning they entitle the holder to rights under the security merely by holding the security, or registered, meaning they entitle the holder to rights only if he or she appears on a security register maintained by the issuer or an intermediary. They include shares of corporate stock or mutual funds, bonds issued by corporations or governmental agencies, stock options or other options, limited partnership units, and various other formal investment instruments that are negotiable and fungible. For other uses, see Stock (disambiguation). ... This article deals with U.S. mutual funds. ... For alternative meanings, see bond (a disambiguation page). ... Main article: Option A stock option is a specific type of option that uses the stock itself as an underlying instrument to determine the options pay-off (and therefore its value). ...

Contents

Classification

Securities may be classified according to the following categories:

  • Issuer
  • Currency of denomination
  • Ownership rights
  • Term to maturity
  • Degree of liquidity
  • Income payments
  • Tax treatment

By Type of Issuer

Issuers of securities include commercial companies, government agencies, local authorities and international and supranational organizations (such as the World Bank). Debt securities issued by a government (called government bonds or sovereign bonds) generally carry a lower interest rate than corporate debt issued by commercial companies. Interests in an asset -- for example, the flow of royalty payments from intellectual property-may also be turned into securities. These repackaged securities resulting from a securitization are usually issued by a company established for the purpose of the repackaging-called a special purpose vehicle (SPV). See "Repackaging" below. SPVs are also used to issue other kinds of securities. SPVs can also be used to guarantee securities, such as covered bonds. Supranationalism is a method of decision-making in international organizations, where power is held by independent appointed officials or by representatives elected by the legislatures or people of the member states. ... The World Bank (the Bank), a part of the World Bank Group (WBG), was formally established on December 27, 1945, following the ratification of the Bretton Woods agreement. ... A government bond is a bond issued by a national government denominated in the countrys own currency. ... A sovereign bond is a bond issued by a national government. ... A Corporate bond is a bond issued by a corporation, as the name suggests. ... This article is about securitization in finance. ... Covered bonds are debt securities backed by cashflows from mortgages or public sector loans. ...


New capital: Commercial enterprises have traditionally used securities as a means of raising new capital. Securities may be an attractive option relative to bank loans depending on their pricing and market demand for particular characteristics. Another disadvantage of bank loans as a source of financing is that the bank may seek a measure of protection against default by the borrower via extensive financial covenants. Through securities, capital is provided by investors who purchase the securities upon their initial issuance. In a similar way, governments may raise capital through the issuance of securities (see government debt). Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank   Money supply Fiscal policy Spending   Deficit   Debt Trade policy Tariff   Trade agreement Finance Financial market Financial market participants Corporate   Personal Public   Banking   Regulation        Government debt (also known as public debt or national debt) is...


Repackaging: In recent decades securities have been issued to repackage existing assets. In a traditional securitisation, a financial institution may wish to remove assets from its balance sheet in order to achieve regulatory capital efficiencies or to accelerate its receipt of cash flow from the original assets. Alternatively, an intermediary may wish to make a profit by acquiring financial assets and repackaging them in a way which makes them more attractive to investors. This article needs additional references or sources for verification. ...


By Type of Holder

Investors in securities may be retail, i.e. members of the public investing other than by way of business. The greatest part in terms of volume of investment is wholesale, i.e. by financial institutions acting on their own account, or on behalf of clients. Important institutional investors include investment banks, insurance companies, pension funds and other managed funds. Drawing of a self-service store. ... Wholesaling consists of the sale of goods/merchandise to retailers, to industrial, commercial, institutional, or other professional business users or to other wholesalers and related subordinated services. ... An institutional investor is an investor who is an institution like a bank, insurance fund, retirement fund, or mutual fund manager. ... To meet Wikipedias quality standards, this article or section may require cleanup. ... Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss. ... A pension (also known as superannuation) is a retirement plan intended to provide a person with a secure income for life. ...


Investment: The traditional economic function of the purchase of securities is investment, with the view to receiving income and/or achieving capital gain. Debt securities generally offer a higher rate of interest than bank deposits, and equities may offer the prospect of capital growth. Equity investment may also offer control of the business of the issuer. Debt holdings may also offer some measure of control to the investor if the company is a fledgling start-up or an old giant undergoing 'restructuring'. In these cases, if interest payments are missed, the creditors may take control of the company and liquidate it to recover some of their investment. Income, generally defined, is the money that is received as a result of the normal business activities of an individual or a business. ... In finance, a capital gain is profit that results from the appreciation of a capital asset over its purchase price. ... Equity investment generally refers to the buying and holding of shares of stock on a stock market by individuals and funds in anticipation of income from dividends and capital gain as the value of the stock rises. ...


Collateral: The last decade has seen an enormous growth in the use of securities as collateral. Purchasing securities with borrowed money secured by other securities is called "buying on margin." Where A is owed a debt or other obligation by B, A may require B to deliver property rights in securities to A. These property rights enable A to satisfy its claims in the event that B becomes insolvent. Collateral arrangements are divided into two broad categories, namely security interests and outright collateral transfers. Commonly, commercial banks, investment banks and government agencies are significant collateral takers. In finance, margin buying denotes a purchase (e. ... This page deals with property as ownership rights. ... This article is in need of attention. ...


Debt and Equity

Securities are traditionally divided into debt securities and equities.


Debt

Debt securities may be called debentures, bonds, notes or commercial paper depending on their maturity and certain other characteristics. The holder of a debt security is typically entitled to the payment of principal and interest, together with other contractual rights under the terms of the issue, such as the right to receive certain information. Debt securities are generally issued for a fixed term and redeemable by the issuer at the end of that term. Debt securities may be protected by collateral or may be unsecured, and, if they are unsecured, may be contractually "senior" to other unsecured debt meaning their holders would have a priority in a bankruptcy of the issuer. Debt that is not senior is "subordinated". In finance, a debenture is a long-term debt instrument used by governments and large companies to obtain funds. ... For alternative meanings, see bond (a disambiguation page). ... Commercial paper is a money market security issued by large banks and corporations. ...


Corporate bonds represent the debt of commercial or industrial entities. Debentures have a long maturity, typically at least ten years, whereas notes have a shorter maturity. Commercial paper is a simple form of debt security that essentially represents a post-dated check with a maturity of not more than 270 days. A corporate bond is a bond issued by a corporation. ...


Money market instruments are short term debt instruments that may have characteristics of deposit accounts, such as certificates of deposit, and certain bills of exchange. They are highly liquid and are sometimes referred to as "near cash". Commercial paper is also often highly liquid. A certificate of deposit or CD is, in the United States, a time deposit, a familiar financial product, commonly offered to consumers by banks, thrift institutions, and credit unions. ... A negotiable instrument is a specialized type of contract which obligates a party to pay a certain sum of money on specified terms. ...


Euro debt securities are securities issued internationally outside their domestic market in a denomination different from that of the issuer's domicile. They include eurobonds and euronotes. Eurobonds are characteristically underwritten, and not secured, and interest is paid gross. A euronote may take the form of euro-commercial paper (ECP) or euro-certificates of deposit.


Government bonds are medium or long term debt securities issued by sovereign governments or their agencies. Typically they carry a lower rate of interest than corporate bonds, and serve as a source of finance for governments. U.S. federal government bonds are called treasuries. Because of their liquidity and perceived low risk, treasuries are used to manage the money supply in the open market operations of non-US central banks. Open market operations are the means of implementing monetary policy by which a central bank controls its national money supply by buying and selling government securities, or other instruments. ...


Sub-sovereign government bonds, known in the U.S. as municipal bonds, represent the debt of state, provincial, territorial, municipal or other governmental units other than sovereign governments. In the United States, a municipal bond or muni is a bond issued by a state, city or other local government, or their agencies. ...


Supranational bonds represent the debt of international organizations such as the World Bank, the International Monetary Fund, regional multilateral development banks and others. It has been suggested that World Bank be merged into this article or section. ... “IMF” redirects here. ... ...


Equity

An equity security is a share in the capital stock of a company (typically common stock, although preferred equity is also a form of capital stock). The holder of an equity is a shareholder, owning a share, or fractional part of the issuer. Unlike debt securities, which typically require regular payments (interest) to the holder, equity securities are not entitled to any payment. In bankruptcy, they share only in the residual interest of the issuer after all obligations have been paid out to creditors. However, equity generally entitles the holder to a pro rata portion of control of the company, meaning that a holder of a majority of the equity is usually entitled to control the issuer. Equity also enjoys the right to profits and capital gain, whereas holders of debt securities receive only interest and repayment of principal regardless of how well the issuer performs financially. Furthermore, debt securities do not have voting rights outside of bankruptcy. In other words, equity holders are entitled to the "upside" of the business and to control the business. This article or section does not cite any references or sources. ... In finance, a capital gain is profit that results from the appreciation of a capital asset over its purchase price. ... This article does not cite any references or sources. ...

For other uses, see Stock (disambiguation). ...

Hybrid

Hybrid securities combine some of the characteristics of both debt and equity securities.


Preference shares form an intermediate class of security between equities and debt. If the issuer is liquidated, they carry the right to receive interest and/or a return of capital in priority to ordinary shareholders. However, from a legal perspective, they are capital stock and therefore may entitle holders to some degree of control depending on whether they contain voting rights.


Convertibles are bonds or preferred stock which can be converted, at the election of the holder of the convertibles, into the common stock of the issuing company. The convertibility, however, may be forced if the convertible is a callable bond, and the issuer calls the bond. The bondholder has about 1 month to convert it, or the company will call the bond by giving the holder the call price, which may be less than the value of the converted stock. This is referred to as a forced conversion.


Equity warrants are options issued by the company that allows the holder of the warrant to purchase a specific number of shares at a specified price within a specified time. They are often issued together with bonds or existing equities, and are, sometimes, detachable from them and separately tradable. When the holder of the warrant exercises it, he pays the money directly to the company, and the company issues new shares to holder.


Warrants, like other convertible securities, increases the number of shares outstanding, and are always accounted for in financial reports as fully diluted earnings per share, which assumes that all warrants and convertibles will be exercised.


The Securities Market

Primary and Secondary Market

The public securities markets can be divided into primary and secondary markets. The distinguishing difference between the two markets is that in the primary market, the money for the securities is received by the issuer of those securities from investors, whereas in the secondary market, the money goes from one investor to the other. When a company issues public stock for the first time, this is called an Initial Public Offering (IPO). A company can later issue more new shares, or issue shares that have been previously registered in a shelf registration. These later new issues are also sold in the primary market, but they are not considered to be an IPO. Issuers usually retain investment banks to assist them in administering the IPO, getting SEC (or other regulatory body) approval, and selling the new issue. When the investment bank buys the entire new issue from the issuer at a discount to resell it at a markup, it is called an underwriting, or firm commitment. However, if the investment bank considers the risk too great for an underwriting, it may only assent to a best effort agreement, where the investment bank will simply do its best to sell the new issue. “IPO” redirects here. ... Underwriting refers to the process that a large financial service provider takes a dump on your face and then uses it to assess the process of providing access to their product like providing equity capital, insurance or credit to a customer. ...


In order for the primary market to thrive, there must be a secondary market, or aftermarket, where holders of securities can sell them to other investors for cash, hopefully at a profit. Otherwise, few people would purchase primary issues, and, thus, companies and governments would be unable to raise money for their operations. Organized exchanges constitute the main secondary markets. Many smaller issues and most debt securities trade in the decentralized, dealer-based over-the-counter markets. Aftermarket (Music), Master psuedoname of projects by engineer/producer Jonathan Borsis. ... Over-the-counter (OTC) trading is to trade financial instruments such as stocks, bonds, commodities or derivatives directly between two parties. ...


In Europe, the principal trade organization for securities dealers is the International Capital Market Association. In the U.S., the principal organization for securities dealers is the Securities Industry and Financial Markets Association. The Bond Market Association represents bond dealers globally. The Bond Market Association is the international trade association for the bond market industry. ...


Public Offer and Private Placement

In the primary markets, securities may be offered to the public in a public offer. Alternatively, they may be offered privately to a limited number of qualified persons in a private placement. Often a combination of the two is used. The distinction between the two is important to securities regulation and company law. Privately placed securities are often not publicly tradable and may only be bought and sold by sophisticated qualified investors. As a result, the secondary market is not as liquid. It has been suggested that Private Issue of Public Equity be merged into this article or section. ... Company law refers to the law of a separate legal entities known as the company and governs the most prevalent legal models for firms, for instance limited companies (Ltd or Pty Ltd), publicly limited companies (plc) or incorporated businesses (Inc. ...


Another category, sovereign debt, is generally sold by auction to a specialised class of dealers.


Listing and OTC Dealing

Securities are often listed in a stock exchange, an organised and officially recognised market on which securities can be bought and sold. Issuers may seek listings for their securities in order to attract investors, by ensuring that there is a liquid and regulated market in which investors will be able to buy and sell securities.


Growth in informal electronic trading systems has challenged the traditional business of stock exchanges. Large volumes of securities are also bought and sold "over the counter" (OTC). OTC dealing involves buyers and sellers dealing with each other by telephone or electronically on the basis of prices that are displayed electronically, usually by commercial information vendors such as Reuters and Bloomberg. Reuters Group plc (LSE: RTR and NASDAQ: RTRSY); pronounced is known as a financial market data provider and a news service that provides reports from around the world to newspapers and broadcasters. ... A Bloomberg Terminal The Bloomberg Terminal is a computer system that enables financial professionals to monitor real-time financial market movements and to place trades. ...


There are also eurosecurities, which are securities that are issued outside their domestic market into more than one jurisdiction. They are generally listed on the Luxembourg Stock Exchange or admitted to listing in London. The reasons for listing eurobonds include regulatory and tax considerations, as well as the investment restrictions. The Luxembourg Stock Exchange (French: ) is a stock exchange based in Luxembourg City, in southern Luxembourg. ... This article is about the capital of England and the United Kingdom. ...


International Debt Market

London is the centre of the eurosecurities markets. There was a huge rise in the eurosecurities market in London in the early 1980s. Settlement of trades in eurosecurities is currently effected through two European computerised systems called Euroclear (in Belgium) and Clearstream (formerly Cedelbank in Luxembourg). Euronext N.V. is a pan-European stock exchange with subsidiaries in Belgium, France, Netherlands, Portugal and the United Kingdom. ... Clearstream Banking S.A. (CB) is the clearing division of Deutsche Börse, based in Luxembourg. ...


The main market for Eurobonds is the EuroMTS, owned by Borsa Italiana and Euronext.


Physical Nature of Securities

Certificated Securities

Securities that are represented by certificates are called certificated securities. They may be bearer or registered.


Bearer Securities

Bearer securities are completely negotiable and entitle the holder to the rights under the security (e.g. to payment if it is a debt security, and voting if it is an equity security). They are transferred by delivering the instrument from person to person. In some cases, transfer is by endorsement, or signing the back of the instrument, and delivery.


Regulatory and fiscal authorities sometimes regard bearer securities negatively, as they may be used to facilitate the evasion of regulatory restrictions and tax. In the United Kingdom, for example, the issue of bearer securities was heavily restricted firstly by the Exchange Control Act 1947 until 1963. Bearer securities are very rare in the United States because of the negative tax implications they may have to the issuer and holder. Year 1947 (MCMXLVII) was a common year starting on Wednesday (link will display full 1947 calendar) of the Gregorian calendar. ... Year 1963 (MCMLXIII) was a common year starting on Tuesday (link will display full calendar) of the Gregorian calendar. ...


Registered Securities

In the case of registered securities, certificates bearing the name of the holder are issued, but these merely represent the securities. A person does not automatically acquire legal ownership by having possession of the certificate. Instead, the issuer (or its appointed agent) maintains a register in which details of the holder of the securities are entered and updated as appropriate. A transfer of registered securities is effected by amending the register.


Uncertificated Securities and Global Certificates

Modern practice has developed to eliminate both the need for certificates and maintenance of a complete security register by the issuer. There are two general ways this has been accomplished.


Uncertificated Securities

In some jurisdictions, such as France, it is possible for issuers of that jurisdiction to maintain a legal record of their securities electronically...


Global Certificates and Book Entry Interests

In the United States, the corporation laws typically do not permit securities to be issued without being represented by one or more registered certificates. In order to facilitate the electronic transfer of interests in securities, a system has developed whereby issuers deposit a single global certificate representing all the outstanding securities of a class or series with a universal depository. This depository is called the Depository Trust Corporation, or DTC. DTC is a non-profit cooperative owned by approximately thirty of the largest Wall Street players that typically act as brokers or dealers in securities. These thirty banks are called the DTC participants. DTC, through a legal nominee, owns each of the global securities on behalf of all the DTC participants. The main functions of the Depository Trust Corporation is to clear and settle stock, bond and money market trades and to provide custody of securities in a cost-effective and automated environment. ...


All securities traded through DTC are in fact held, in electronic form, on the books of various intermediaries between the ultimate owner, e.g. a retail investor, and the DTC participants. For example, Mr. Smith may hold 100 shares of Coca Cola, Inc. in his brokerage account at local broker Jones & Co. brokers. In turn, Jones & Co. may hold 1000 shares of Coca Cola on behalf of Mr. Smith and nine other customers. These 1000 shares are held by Jones & Co. in an account with Goldman Sachs, a DTC participant, or in an account at another DTC participant. Goldman Sachs in turn may hold millions of Coca Cola shares on its books on behalf of hundreds of brokers similar to Jones & Co. Each day, the DTC participants settle their accounts with the other DTC participants and adjust the number of shares held on their books for the benefit of customers like Jones & Co. Ownership of securities in this fashion is called beneficial ownership. Each intermediary holds on behalf of someone beneath him in the chain. The ultimate owner is called the beneficial owner. This is also referred to as owning in "Street name".


Other Depositories: Euroclear and Clearstream

Besides DTC, two other large securities depositories exist, both in Europe: Euroclear and Clearstream.


Divided and Undivided Security

The terms "divided" and "undivided" relate to the proprietary nature of a security. Proprietary indicates that a party, or proprietor, exercises private ownership, control or use over an item of property, usually to the exclusion of other parties. ...


Each divided security constitutes a separate asset, which is legally distinct from each other security in the same issue. Pre-electronic bearer securities were divided. Each instrument constitutes the separate covenant of the issuer and is a separate debt.


With undivided securities, the entire issue makes up one single asset, with each of the securities being a fractional part of this undivided whole. Shares in the secondary markets are always undivided. The issuer owes only one set of obligations to shareholders under its memorandum, articles of association and company law. A share represents an undivided fractional part of the issuing company. Registered debt securities also have this undivided nature. Look up share on Wiktionary, the free dictionary. ...


Fungible and Non-fungible Security

The terms "fungible" and "non-fungible" relate to the way in which securities are held.


If an asset is fungible, this means that when such an asset is lent, or placed with a custodian, it is customary for the borrower or custodian to be obliged at the end of the loan or custody arrangement to return assets equivalent to the original asset, rather than the identical asset. In other words, the redelivery of fungibles is equivalent and not in specie (identical).


Undivided securities are always fungible by logical necessity. Divided securities may or may not be fungible, depending on market practice. The clear trend is towards fungible arrangements.


Regulation

In the United States, the public offer and sale of securities must be either registered pursuant to a registration statement that is filed with the U.S. Securities and Exchange Commission (SEC) or are offered and sold pursuant to an exemption therefrom. Dealing in securities is heavily regulated by both the federal authorities (SEC) and state authorities. In addition the industry is heavily self policed by Self Regulatory Organizations (SROs), such as the NASD or the MSRB. The U.S. Securities and Exchange Commission, commonly referred to as the SEC, is the United States governing body which has primary responsibility for overseeing the regulation of the securities industry. ...


Due to the difficulty of creating a general definition that covers all securities, Congress attempts to define "securities" exhaustively (and not very precisely) as: "any note, stock, treasury stock, security future, bond, debenture, certificate of interest or participation in any profit-sharing agreement or in any oil, gas, or other mineral royalty or lease, any collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or in general, any instrument commonly known as a 'security'; or any certificate of interest or participation in, temporary or interim certificate for, receipt for, or warrant or right to subscribe to or purchase, any of the foregoing; but shall not include currency or any note, draft, bill of exchange, or bankers' acceptance which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited." - Section 3a item 10 of the 1934 Act. For other uses, see Stock (disambiguation). ... A treasury stock or reacquired stock is stock which is bought back by the issuing company, reducing the amount of outstanding stock on the open market (open market including insiders holdings). ... In finance, a futures contract is a standardized contract, traded on a futures exchange, to buy or sell a certain underlying instrument at a certain date in the future, at a specified price. ... For alternative meanings, see bond (a disambiguation page). ... In finance, a debenture is a long-term debt instrument used by governments and large companies to obtain funds. ... A profit-sharing agreement in the USA is the agreement that establishes a plan maintained by the employer to share its profits with its employees. ... Mineral rights, mining rights, oil rights or drilling rights, are the rights to remove minerals, oil, or sometimes water, that may be contained in and under some land. ... This article or section should include material from Tenancy agreement A lease is a contract conveying from one person (the lessor) to another person (the lessee) the right to use and control some article of property for a specified period of time (the term), without conveying ownership, in exchange for... A certificate of deposit or CD is a time deposit, a financial product commonly offered to consumers by banks, thrift institutions, and credit unions. ... A put option (sometimes simply called a put) is a financial contract between two parties, the buyer and the writer of the option. ... Look up call in Wiktionary, the free dictionary. ... In finance, a straddle is an investment strategy involving the purchase or sale of particular derivatives. ... In finance options are types of derivative contracts, including call options and put options, where the future payoffs to the buyer and seller of the contract are determined by the price of another security, such as a common stock. ... A certificate of deposit or CD is a time deposit, a financial product commonly offered to consumers by banks, thrift institutions, and credit unions. ... A put option (sometimes simply called a put) is a financial contract between two parties, the buyer and the writer of the option. ... Look up call in Wiktionary, the free dictionary. ... In finance, a straddle is an investment strategy involving the purchase or sale of particular derivatives. ... In finance options are types of derivative contracts, including call options and put options, where the future payoffs to the buyer and seller of the contract are determined by the price of another security, such as a common stock. ... A stock exchange, share market or bourse is a corporation or mutual organization which provides facilities for stock brokers and traders, to trade company stocks and other securities. ... // A currency is a unit of exchange, facilitating the transfer of goods and services. ... A cheque (British English) or check (American English), thought to have developed from Persian چك chek, is a negotiable instrument instructing a financial institution to pay a specific amount of a specific currency from a specific demand account held in the maker/depositors name with that institution. ... A negotiable instrument is a specialized type of contract which obligates a party to pay a certain sum of money on specified terms. ... A bankers acceptance, or BA, is a time draft drawn on and accepted by a bank. ... Maturity may refer to: Sexual maturity Maturity, a geological term describing hydrocarbon generation Maturity, a financial term indicating the end of payments of principal or interest Look up Maturity in Wiktionary, the free dictionary. ...


The US Courts have developed a broad definition for securities that must then be registered with the SEC. There is an investment of money, a common enterprise and expectation of profits to come primarily from the efforts of others. See SEC v. W.J. Howey Co. and SEC v. Glenn W. Turner Enterprises, Inc. Holding An investment contract under the Securities Act of 1933 is one which involves and investment of money due to an expectation of profits arising from a common enterprise which depends solely on the efforts of a promoter or third party. ...


See also

Finance studies and addresses the ways in which individuals, businesses, and organizations raise, allocate, and use monetary resources over time, taking into account the risks entailed in their projects. ... In finance, financial markets facilitate: The raising of capital (in the capital markets); The transfer of risk (in the derivatives markets); and International trade (in the currency markets). ... Settlement (of securities) is the process whereby securities or interests in securities are delivered, usually against payment, to fulfill contractual obligations, such as those arising under securities trades. ... Financial supervision is government supervision of financial institutions by regulators. ... A vulture fund is an financial organization that specializes in buying securities in distressed environments, such as high-yield bonds in or near default, or equities that are in or near bankruptcy. ... Eat pizza everyday. ...

External links

  • Investment Banking - A concise, illustrated introduction to investment banking and the issuance of new securities.
  • Reglo- A multilingual glossary of investment banking terminology

Association

List

Topics in finance include: // Finance an overview Arbitrage Capital (economics) Capital asset pricing model Cash flow Cash flow matching Debt Default Consumer debt Debt consolidation Debt settlement Credit counseling Bankruptcy Debt diet Debt-snowball method Discounted cash flow Financial capital Funding Financial modeling Entrepreneur Entrepreneurship Fixed income analysis Gap financing...

Market data


  Results from FactBites:
 
Security (finance) - Wikipedia, the free encyclopedia (2273 words)
The distinction between securities and interests in securities is often overlooked in practice, although it is a source of legal risk.
The holder of a debt security, typically a bond, is owed a debt by the issuer and is entitled to the payment of principal and interest, together with other personal rights under the terms of the issue, such as the right to receive certain information.
Unlike bearer securities, registered securities comprise of a bundle of intangible rights (chose in action) including the right of the shareholder to share in all the assets of a company, subject to all the liabilities of the company.
  More results at FactBites »

 
 

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