Security Market



Security Market

Organization and Functioning of Securities Markets

The securities market known as the financial market is the market for long-term capital, that is to say, the meeting place for economic agents and those who have a need for funding. Securities are the essential source of funding for many companies. To ensure the effectiveness of investments made by this means and the security of transactions, EU applies common conditions of operation to investment institutions. European legislation aims to facilitate the single market for investment, particularly by harmonizing and improving procedures relating to investment funds. Other measures include the transparency of operations and mechanisms to prevent the risk of abuse or to protect shareholders in the event of failure of investment organizations.

The financial market offers diversified products (stocks, bonds) to attract capital investment and thus finance the economy:

Actions: these are equity interests in a corporation that gives its possessor a share and a proportionate interest in the management of the company on the profits and corporate assets.

Bonds: represent a claim on the issuer which entitles its holder to payment of interest and repayment of capital. The bond has no political right (it does not have any place in meetings), except in case of change in the structure of society.

The financial market is composed of two distinct but interdependent compartments:

The primary market creates and issues securities (Reilly, 2012, 90).

The secondary market or stock exchange where the securities are traded.

The primary market is the market for the issuance of securities, commonly known as the new home market. The primary market is where the new securities are issued; there is the capital increase and bonds investment. This market plays a very important role in the contribution of the financing in the economy, insofar as it allows companies, banks, financial institutions, local authorities, etc. to obtain the necessary resources to cover their financing needs from agents releasing a surplus of funds. The operations carried out in this compartment by public capital increase have essentially two situations:

1 - Either they are performed during an IPO, or as such, they allow issuers to benefit from the 50% reduction of corporate income tax (CIT) for three years after IPO, established by the Finance Act 2001 to encourage introductions by capital increases;

2 - Either they are transactions reserved for employees or partners in the context of merger transactions (Reilly 2012, 89).

Efficient Capital Markets

Capital markets allow the encounter between economic agents with surplus capital and agents with financing needs. They are divided into three compartments: the financial market, money market and the credit market. Capital markets include capital markets in the short term, the money market in the medium and the financial market in the long term market.

For thirty years, the capital markets were marked by an abundance of liquidity, fueled by oil shocks through the development of emerging countries accompanied by the formation of large reserves, and the increase in the price of raw materials. Capital markets have been globalized, with liberation of capital movements more ...