Transcript Security Trading - Uniwersytet Warszawski

Security Trading
Securities suppliers. Primary
market
•
•
•
•
•
Treasury
Central Bank
Companies
Financial institutions
Mutual funds
2
Market’s participants. Secondary
market
•
•
•
•
•
•
Mutual funds, financial institution
Pension funds
Insurance companies
Brokerage houses
Individuals
Others
3
Entry on the securities market
• Analyse on company investment needs and
alternative ways to cover them
• Decision about issue, GA resolution
• Hire of issue advisor
• Preparing documents to SEC
• SEC Appointment
• Issue registration
• Choice of price settlement and distribution
• Underwriting (optionally)
4
Primary market. Required documents for
appointment
• Information from the companies register (address, name of
board members, proxies, type of production, registered
capital)
• Balance sheet checked by chattered accountant
• Costs and profits account (checked)
• Information from tax office about tax duty fulfilment
• Prospectus of issue or information memorandum
• Agreement with securities distributor or information about
self distribution
• Agreement with publisher for prospectus publication (short
form). Information about full prospectus availability
5
Prospectus of issue. Contents
•
•
•
•
•
•
•
•
Information about current and previous issue
Extracts from balance sheet, company books etc.
Dates from company register
Big stock owners
Risk types concerning the company stock
Target of the issue
Purpose concerning company development
Other information having possible impact on stock
6
Bonds. Primary market
• T-Bonds are sold on action organised by the
central banks. Only financial institution (not
all) are admitted
• Corporate bonds are sold by the banks,
mainly on interbank market
• Municipal bonds are sold like above
7
Bonds. Secondary market
• High majority of bonds are traded on
interbank market
• Amount of bonds trading on the stock
exchange is about few percent
• Corporate and municipal bonds market is
usually established by banks assisting by
the issue
8
Stock. Primary market
• New stock series (IPO) needs prospectus of issue, the next
– information memorandum. Information memorandum is
enough i n case small issue – 2,5 million euro
• New issues needs direct agreement SEC, the next (new
series existed stock) are treated as admitted if SEC during
2 weeks has not declare any objections
• New stock is usually sold in system of subscription
• In this system potential investors declare the quote and
maximum price by which they are able to buy.
• Issuer settles maximum price which allow to sold whole
9
issue
Warsaw Stock Exchange
• Basic market. Requirements
- own capital minimum 1 million €
- at least 25% stock or 17 millions of capital
owned by small investors
• Parallel market
- company is not in process of bankruptcy
• Participants of the both markets are oblige to send
quarterly information about economic results and
compliments of rules of corporate governance.
10
Special facility for small issuers.
Markets AIM type
• British AIM, Polish NewConnect are not
regulatory markets, however conducted by the
same company which conducts stock exchange
• This markets join trading public and private issue
• For private issue very short assemble of
information is needed
• Chosen stock exchange members keep carry on
each issuer („nomad” in London - all the time,
authorised adviser in Warsaw – at least one year)
11
Qualitative segments
• There is the list of the companies (stocks),
which excellent fulfil the pattern company
friendly for investors
• There are two requirements
- regularly meetings with investors
- full compliance of the corporate
governance rules
12
Corporate governance
• Best practices in:
- General Assembly taking into account
interest of all stock holders
- chose of the board (some members
independent from big owners
- elimination the connections creating
discrepant interest bord and CEO members
- clear and fairly management rules
13
Stock exchange. Trading systems
• Order driving – orders are send by any price
• Prices driving – price are quoted by market
makers
• Fixing – price is determine by the specialist
in order to get maximum turnover
14
Basic order types
•
•
•
•
•
•
•
•
Market order
Limit order
With limit of appearance
Stop order
On the opening, on the close
Fill and kill
Immediate or cancel
Confidentionally order
15
Trading session.
Phases
• Preopening – reception of orders,
without transactions
• Opening – opening price
determination
• Continuos trading
• Close
• Balancing activity of the
specialists
• Afternoon preopening
16
Fixing
• The method to search the price maximizing
the stock turnover in chosen moment
• To set up this price limit orders are
necessary
• The modern stock exchanges use method
two times daily (on the opening and on the
close)
• Less liquid stock is traded only by this
system
17
Transactions proceeding
• Client order is transfer to the stock exchange
trading system
• Orders are matching on the best price
• If there isn’t a proper contra order, it is wrote
down in the orders sheet
• Information about transactions are transfer to the
Clearing House. It calculate the credit (debit) on
the brokerage houses accounts, transfer securities
and send orders to pay.
• The brokerage house make accounting operation
on its clients accounts
18
Way of order
• Client put order personally or by phone ( internet)
• If it is sale order, proper securities should be on his
account in the brokerage house. By buy order not the
whole amount is required, credits are in use
• Brokerage house sent order from the own terminal to
the trading system of the stock exchange
• After trading session brokerage house get the
information about transaction. If order could be fulfil
– is cancelled
19
• The results o9f operation are transferred to the clients
Short sale
• Short sale – sale of securities which are not
possessed by the investor, repurchased until clearing
time
• Many countries allow such operation only if
securities are hired or there are special agreements
with the real owners
• Pension funds, mutual funds are often the institution,
which insure securities delivery
• Implementation – if price downfall is expected
20
Forbidden operation
• In the broker activity
- churning (buy and sell without efforts for the best
order performance
- front running (put own order before client owner
• Price manipulation
- match order (sending buy and sell order on the same
price
- intra trade (inducement daughter companies to buy/sell
stock of mother company
- pool (common market operations of investors)
- wash sale (sale to get contemporary lost for the tax
decrease)
21
Forbidden operation cont
• Unfairly information use
- use of rumour, black PR
- insider trading (use of information being
not published)
22