The Financial Markets

       Securities in the form of shares give a participation right in management of joint stock company;

       Securities grant the right to share reception in enterprise property at its liquidation.

Allocate one more, the basic property of a security - its capability to serve as a purchase and sale subject in stock market because securities freely or with some restrictions address in the market, providing a modulation of the capital from one emitter to another, and also extraction of the income of a gain of course cost, accomplishment of mortgage function at credit reception etc. Capability of circulatuion distinguishes a security from other financial records.

Classification of securities can be performed by various criteria. So, the Federal act “About the security market” enters concept of the issue security which characteristic consists in the following:

       Takes place releases;

       Fixes set of the property and non-property rights which are subject to the certificate, a concession and unconditional realization according to acting order;

       Has equal volumes and terms of realization of the rights in one release without dependence from time of acquisition of a security.

Shares concern such securities, bonds and investment shares. Release of issue securities isn't always accompanied by development of the prospectus of issue, however their release should be registered in financial bodies. Paper issue can be performed in two forms: open (public) placing of securities among potentially unlimited circle of investors, and also the closed (private) placing of securities among the limited circle of investors.

Depending on the form of granting of the capital the investor to the emitter and reflexions of these means in a property complex of the enterprise differentiate share and debt securities. The equity security fixes the rights of the owner to a part of property of the enterprise at its liquidation, participation in forming of an authorised fund, the right to reception of a part of profit and to participation in management. An example – shares. Debt papers reflect first of all credit relations between their owner and the emitter who undertakes to redeem these securities after certain time and to pay certain percent. Bonds concern such papers.

Classification of securities on emitters subdivides them into following kinds:

       state (issued by the federal government),

       municipal (are issued by regional authorities)

       corporate (issued by the enterprises and the private sector organizations, basically joint stock companies).

Also securities can be classified how realization of the rights fixed by a security is performed. On this sign securities are subdivided on demand, nominal and order. The rights certificated by demand securities, belong to the person who represents these securities and presentations of such security enough for realization of the rights fixed by it. These papers are most simple in circulation. Transition of the rights is performed by simple delivery of this paper. On these papers the register of owners isn't led. An example of such security – bonds of the state savings loan. In the Russian Federation the volume of release of demand shares is limited by a certain share from size of the paid authorized capital. This specification establishes to Federal service on financial markets. Unlike demand, nominal securities provide unequivocal identification of all owners of securities, i.e. Nominal securities are meant as such papers, the information on which owners is contained in the register and transition of the rights on which, as well as realization of the rights fixed by these papers identification of the owner demand. Order securities provide, the rights on them can belong to the person named in the security who can perform itself these rights or appoint the order (order) other authorized person. The rights on an order paper are transferred by fulfillment on this security of an endorsement – an endorsement.

In the release form differentiate the documentary securities issued in the cash form in the form of forms of securities and paperless, issued in cashless form. Fixing of the rights on bank entry securities is produced by the emitter or special firm by register conducting.

On circulation stages differentiate primary market securities on which they are on sale or transferred by the emitter to their first owners and secondary market securities on which transactions of purchase and sale of the securities which have passed primary placing are made.

Depending on advanced repayment possibility differentiate irrevocable securities which can't be withdrawn and extinguished the emitter ahead of schedule. It should be provided conditions at their release and is fixed in the issue prospectus, as well as for the revocable papers, accordingly able to be withdrawn and extinguished ahead of schedule. Usual conditions of a withdrawal are provided for bonds and shares.

Whenever the possibility of free circulation securities are subdivided into following kinds: transferable securities which can freely be bought and on sale not addressing which are allocated only by means of a primary market (they can be redeemed only the emitter) and securities with the limited possibility of circulation.

Also securities can be classified on volume of the given rights: the primary securities which are the rights to primary resources (the earth, real estate, money funds, etc.) - concern such securities of the share, bonds, bills, bills of lading, etc. and the derivative securities certificating the rights of their owner on purchasing or sale of primary securities (shares, bonds) - concern such papers options, warrants, futures and forward contracts.

According to the Civil code of the Russian Federation in stock market of Russia following kinds of securities are admitted to circulation:

       Government bonds;

       Bonds;

       Bills;

       Checks;

       Deposit certificates;

       Savings certificates;

       Bank savings books bearer;

       Bills of lading - the securities expressing an ownership right on the concrete goods specified in them;

       Shares;

       Privatization securities;

       Other securities. Which the securities act can be carried to number of those;

Chapter 2.

2.1 Features of stock market in Russia.

The security market existed in imperial Russia and developed about 150 years (1769-1913) in a close connection with evolution of economy and a country policy. Here it is possible to allocate three periods:

The first – since 1769 till the end of 50th of 19 centuries – time of origin and the beginning of formation of the security market when there was mainly a circulation of government securities.

The second period – since 60th years of 19 centuries for 1897 - has coincided with currency reform end ("gold currency" entering). This period is considered the major as covers intensive development of stock market.

The third period – since 1987 for 1913 (the First World War beginning) – corresponds to lines of formation of the "mature" security market.

As well as in other countries, in Russia as the first share values on financial market government securities acted. Circulation of such securities, as bills and shares in parallel developed. The first Bill charter has been constituted under Peter I decree under the sample of the Leipzig Bill charter. In 18-19 centuries it was repeatedly processed. In 1902 the new bill charter representing considerable achievement in comparison with previous, created on foreign samples has been confirmed. After serfdom cancellation joint stock companies have started to be created and to 1914 2235 societies had capitals in the 4,7 billion sum rub, from them on a share 1621 industrial societies it was necessary to 3,2 billion.

To the beginning of 90th Russia became on a way of revival of the security market considering both our historical traditions, and experience of the developed market economies. The security market can develop only at normal commodity - monetary relations and property relations. And thereupon the considerable role is played by privatization. And in the conditions of undeveloped stock market the privatization directly connected with shares, is an initial impulse for its forming as allows to participate in it to the majority of the enterprises and the population.

Privatization has caused to life a new kind of securities – privatization checks (vouchers). These are government securities bearer, granting the right to acquisition of a part of state ownership which was gratuitously transferred to citizens of the Russian Federation in the course of privatization. Last, on the one hand, is connected with occurrence in the market of vouchers; with another – promotes formation of joint stock companies as the leader organizational – the legal form of the enterprises. It acts as the reason of issue not only new shares and bonds, but also derivative securities, expands circulation of corporate securities. Thus, privatization process has served as the initial stage of revival of the security market.

2.2 The market of government securities.

Government securities have arisen with development of economic functions of the state for which realization the system of public finances in which the budgetary subsystem is included has been created. The budget of the modern state, as a rule, is characterized by excess of expenses over incomes, i.e. it is in deficit. Central government budget deficit shouldn't be considered as entirely negative phenomenon, and in connection with features of development of the country at a concrete historical stage. Deficit is negative, if it – a consequence of wars, militarization of economy, decrease in a level of production. If deficit reflects active participation of the state in economic growth of the country, and its overcoming meets less difficulties.

Central government budget deficit can be covered at the expense of credits of Central bank of the Russian Federation. If credit reception is impossible or it is insufficient, resort to issue of bank notes or to release of debt obligations. Last decade their release tends to increase and central government debt formation in all countries.

For an estimation of a condition and prospects of the Russian security market it is necessary to consider it in a retrospective show of latest developments. It is possible to allocate the major factors which most strongly have affected a situation in the Russian stock market:

       An adverse situation in world stock markets;

       Strengthening of political instability in Russia;

       Deterioration of an economic situation of Russia.

Let's consider serially all three factors on an example of crisis of 1998 which has left a huge trace on history and development of Russia. In 1998 growth rates of the American stock market have decreased. Dow-Johns stock index (D.J.) has reached in July of a historical maximum – 9400 points. As the reason for it flight of investors from the countries with more risky investments into the most reliable market of the USA, and also the advantages received by the American multinational corporations at the expense of decrease labour and material costs has served. Essential influence on growth of an index was rendered by numerous merges of the oil companies as a result of price reduction on oil, and as consequence – increase of profitability. All it was a consequence of crisis in the Asian countries. However in the second half of the year the situation has changed. Sales volumes of the large companies because of devaluation of some the Asian currencies have essentially fallen. Growth of gross national product for the second quarter has constituted 1.8 % against 5.5 % in the first. Financial crisis in Russia became the important factor which has affected world stock market. For short term the Dow Jones index has fallen to 7600 points (to 19 %). The reputation of the USA as reliable financial refuge for investors has been undermined. ФРС the USA has gone on emergency measures and has lowered a benchmark interest rate from 5.50 % to 4.75 % therefore the Dow Jones index in November has again reached the historical maximum – 9400 points, but not for a long time and soon has again decreased.

Considering the factor of deterioration of an economic situation in Russia, it is necessary to consider influence world in general economic conjuncture. So, in 1998 on an economic situation in Russia negative influence has rendered sharp falling of the world prices for energy carriers because of decrease in consumption of oil owing to proceeding global financial crisis. So, the prices for monthly futures of mark Brent at the London stock exchange have fallen from $18 for barrel in the beginning of January to $9.9 in the middle of December. The basic export mark of Russian oil Urals is quoted even more low - more cheaply Brent on $1-2.