Securities M

Question 1

What is a security?

Answer 1

• Instruments giving their legal holders the rights to money or other property (e.g. stocks and bonds)
• Designed to facilitate the transfer (liquidity) of these rights
• Typically defined under the laws of the country in which rights are being transferred. US Example:

Question 2

Bid/Offer

Answer 2

Trader's Buy/Sell price
A marketplace (Bid/Offer) where capital is channeled from sectors with extra cash (lenders, investors, buyers) to cash-short sectors (borrowers, investments, sellers).  Markets have expanded to cover risk hedging and other functions in addition to the flow of money

Question 3

Private vs Public Markets

Answer 3

– Public issued securities are registered under SEC Acts (or corresponding laws in other countries) and therefore can be offered broadly to investors

– Private issued securities qualify for an exemption (security or transaction based)

• Pros: Avoids costly, time consuming registration process
• Cons: Less liquid. Can only offer securities to a limited number of Accredited Investors (e.g. Banks, insurance companies, investment companies, or person who qualifies as an accredited investor (on the basis of financial sophistication, net worth, knowledge, and experience in financial matters)
• Liquidity and valuations in private markets have been improving

Question 4

What makes a trades?

Answer 4

• Sell Sony 2020 Bond at 101
• Undertake an M&A deal: Alibaba purchases eBay
• Sell US$ and Buy Yuan at 6.210
• Short shares in Ruby Tuesday and long shares in Chipotle

Question 5

What information do you need?

Answer 5

1)What is it
2) price
3) buying or selling
4) amount
5) settlement date
if it is loan, principel,
Interest rate,
year to maturity
bond: coupon rate, RRR, annual or semiannual