Operations in the open market: their varieties and the principle of implementation

The main operations on the open market are related tothe implementation of the state's monetary policy, one of the instruments of which are securities. The basis of this policy is the operations of the Central Bank, related to the purchase and sale of government securities to influence the money market.

Operations in the open market are designed to regulatethe supply and demand for securities of national importance, and cause a corresponding positive reaction in commercial banks. When the Central Bank sells such a "product" to commercial banks, the credit expansion of the latter is automatically limited, the money supply in circulation is reduced and, thereby, the ruble rate is increased.

From economic history, one can see thatthe concept of "open market operations" has been used since the 1920s in the United States. Already at that time, the above described operations of the Central Bank in America were widely spread due to the presence of a large share in the economy of the country of the corresponding market.

Open market policy is an instrument of flexibleand rapid impact, since the Central Bank, with the help of the proposed high interest in buying and selling the Central Bank, actively affects commercial banks and the amount of their liquid assets, and also manages credit emission.

Acquiring securities on the open market, hesignificantly increases the reserves of these commercial banks and there is an increase in the money supply. This mechanism is very effective during the economic crisis.

Operations in the open market are also representedtrade shares, which is the process of transfer of ownership of these securities as on certain trading floors, and through the Internet. At the initial placement of shares (issue), the owners of the enterprise can receive additional funds for the implementation of its activities. Secondary turnover allows only to change the owners of shares, but the enterprise no longer brings direct income. With the help of an exchange quotation it is possible to determine the present price of a business entity. When making a decision by shareholders to expand the activities of its enterprise (its consolidation), an additional issue of shares may be made.

Very great popularity todaypurchase and sale of shares on the exchange using Internet technologies. The name of such transactions is Internet-trading. The very procedure for implementing this operation on the open market is much simpler than on a conventional exchange. The only thing that is necessary is the availability of special software and, of course, a computer connected to the Internet.

Still among the types of operations on the openmarket, futures transactions can be identified that relate to the transfer of rights-duties for the supply and purchase of goods on the exchange. In contrast to the conclusion of transactions for ordinary (real) goods, with futures only the rights to the goods are stipulated, i.e. its actual transmission and reception is not carried out.

A futures contract is subject to suchpaper transaction. This document defines both rights and obligations for the transfer or receipt of goods. It can also contain information on the order of such transfer or receipt. A futures contract can not relate to securities. Another feature is the impossibility of its cancellation just like that. It can be liquidated only when the agreed goods are delivered within the terms provided by the contract, or if the opposite transaction is concluded with a similar quantity of the goods.