chapter 2 Securities market
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Securities market
Chapter 2
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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
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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
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2.2. Functions and roles of
securities market
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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
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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
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• 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
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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.
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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.
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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.
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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.
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Equity market
• The market in which shares are issued
and traded, either through exchanges or
over-the-counter markets.
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Bond market
• The environment in which the issuance
and trading of debt securities occurs.
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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)
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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.
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2.4. Operation principles of
securities market
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Competition principle
Natural justice principle
Disclosure principle
Intermediate principle
Centralized principle
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2.5. Participants
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Issuing organizations
Investors (individual and organization)
Brokers and stock dealers
Market support organizations.
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Participants directly organize the
operation
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Stock exchange
The Securities Depository Centre
Nominated bank for payment
Securities companies
Commercial banks
The Associations of financial Investors
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The Stock Exchange
• Definition of stock exchange
• Operational organization model of stock
exchange
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Definition of Stock exchange
• The Stock Exchange is the Organization,
which organizes the securities trading
market for securities listed in it.
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Operational organization model of
stock exchange
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Club and association model
Joint stock company
Joint stock with government participation
100% state-own enterprise.
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Organization model of stock
exchange in Vietnam
• Organizational model
• Organizational structure (institutional
framework)
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Institutional framework of stock
exchange
BOARD OF
DIRECTORS
BOARD OF
MANAGERS
Transactions
management
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Listing
management
Clearance
section
Member
management
Other
competencies
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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.
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TASK FOR CHAPTER 2
Write about:
• OTC Market in Vietnam
• OTC market in the other countries
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Tasks to prepare for the chapter 3
• Read the Securities Law of Vietnam
• Go to the HOSE’s website
and
HNX’s website
to find the regulations (in English)
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