Functions of securities, their essence and properties
The essence of securities.
Economic activity is an important componentour modern life, without which many processes would be inconceivable. For example, economic activity of individuals and legal entities is impossible without transferring money from one entity to another. You can transfer money in two ways: by lending and issuance / circulation of securities (CB).
In order to disclose the essence of securities, consider the four distinctive features of a security:
1. A security is a monetary document that can express two kinds of rights: in the form of the title of the owner and as the ratio of the loan of the person owning the document to the person who issued it. In the first case, it is a stock, in the second case - a bond.
2. A security is a documentary evidence of the investment of funds. Thanks to securities, money savings become material objects.
3. Securities reflect the requirements imposed on real assets.
4. These papers generate revenue.
Naturally, the paper is valuable not becausesomeone called it valuable, but because it certifies the owner's right to something valuable. If you do not refer to the terminology, then the owner of the security has the following rights: the right to verify (obtain an extract from the register), the right to exercise (ie the right to return the par value or participation in management) or the right to give (donate, sell, lay) the CB to another person.
Functions of securities.
The functions of securities are as follows:- redistribution (the Central Bank plays an important role in the flow of capital between different spheres of the economy, population layers, industries and the state, - the realization of the owner's right to the part of the income that he receives from capital investment, or the return of capital - the granting of additional rights , the right to participate in management, etc.).
Do not confuse the functions of securities and functionssecurities market. The CB market has much more functions. We simply cite their classification, without a detailed explanation, so that it would be clear what we are talking about. Like all markets, the Central Bank market performs general market and specific functions.
The general functions are as follows: commercial, pricing, information, regulatory. Specific functions: redistribution of capital, redistribution of market risks or hedging, change in the form of ownership. As you can see, the functions of securities and the functions of the securities market are significantly different.
Properties of securities.
The CB has a lot of distinctive qualities, we list the main ones:
- market nature;
- Seriality;
-reversibility;
- profitability;
- liquidity;
- standard;
- risk;
- participation in civil circulation.
Speaking about securities, their essence and properties,it is impossible not to say about the types of the Central Bank. It is customary to single out two large groups of securities: basic and derivative. The main, in turn, are divided into primary (bonds, stocks, mortgages, bills) and secondary (warrants for securities, depositary receipts, subscription rights, strips, etc.). Derivatives CB: futures contracts, free-floating options, etc.
There are other classifications of securities,for example, by the nature of the rights they certify, they are divided into: legal documents and legally binding ones. Many authors offer their classifications.
CB have a huge number of species, there arespecial articles in the legislation, where their full list is given, we list some of them: government bonds, bills of lading, certificate of deposit, share, savings certificate, bank savings bearer book, warehouse certificate, double warehouse certificate, simple warehouse certificate, bond, check bill etc.
