Securities Markets (Definitions and Concepts)

Summary

This script provides an in-depth discussion on securities, markets, and key concepts related to them. It explains the meaning of securities, such as stocks and bonds, highlighting the difference between ownership (stocks) and indebtedness (bonds). The script also defines a market as a mechanism where buyers and sellers interact, outlining different types of markets, including the money, capital, stock, bond, and derivatives markets. Additionally, it covers the characteristics of a good securities market, emphasizing transparency, liquidity, internal efficiency, and external efficiency, which ensure fair and effective market functioning.

Takeaways

• 📄 Securities are proofs of ownership or indebtedness in a company, with typical examples being stocks and bonds.
• 🏢 Stocks represent shares of ownership in a corporation, meaning when you buy shares, you become a part-owner of the company.
• 📊 Shares and stocks can be used interchangeably, but technically, shares refer to a specific company, while stocks can be used more broadly.
• 💸 Bonds are contracts of debt where the issuer borrows funds from the investor, creating a liability for the issuer.
• 🛒 A market is a mechanism that brings together buyers and sellers to facilitate the exchange of goods and services, and can exist physically or online.
• 📈 Types of markets include the money market, capital market, stock market, bond market, and derivatives market, each dealing with different forms of goods and financial instruments.
• 💵 The money market deals with short-term, highly liquid securities, while the capital market focuses on long-term securities like stocks and bonds.
• 📉 The bond market deals with long-term debt instruments such as treasury notes and municipal bonds, while the stock market focuses on equity securities.
• ⚖️ The derivatives market includes financial instruments like options and futures contracts, which derive their value from other assets.
• 💡 A good securities market is characterized by transparency, liquidity, internal efficiency (low transaction costs), and external efficiency (quick price adjustments to new information).

Q & A

What are securities, and what do they represent?

Securities are proofs of one's ownership or indebtedness in a company or entity. They represent either ownership, as in the case of stocks, or a debt obligation, as in the case of bonds.

What is the difference between stocks and shares?

While stocks and shares can be used interchangeably, stocks generally refer to ownership in any company, while shares refer to ownership in a specific company.

What is a bond, and how does it differ from stocks?

A bond is a contract of debt where the issuer borrows funds from the investor. Unlike stocks, which represent ownership in a company, bonds indicate indebtedness and are financial liabilities for the issuer.

What is the definition of a market in the business context?

In the business context, a market is a mechanism that brings together buyers and sellers to facilitate the exchange of goods and services. It does not necessarily require a physical location, as transactions can occur online.

What are the different types of securities markets?

The different types of securities markets include the money market, capital market, stock market, bond market, and derivatives market, each dealing with specific types of securities.

What is the main difference between the money market and the capital market?

The money market deals with short-term securities, typically with maturities of less than one year, while the capital market handles long-term securities like stocks and bonds with maturities exceeding one year.

What are equity securities, and how do they differ from debt securities?

Equity securities, such as stocks, represent ownership shares in a company, whereas debt securities, like bonds, represent a financial liability or debt owed by the issuer to the investor.

What is a derivative, and how is its value determined?

A derivative is a financial instrument whose value is derived from the performance of underlying assets like commodity prices, foreign exchange rates, or interest rates. Its value depends on the movement of these underlying assets.

What are the characteristics of a good securities market?

A good securities market is characterized by being transparent, liquid, internally efficient (low transaction costs), and externally efficient (prices adjust quickly to new information).

What does it mean for a market to be externally efficient?

A market is externally efficient when prices adjust quickly to new information, ensuring that the prevailing price reflects all available data regarding the security.

Outlines

00:00

📚 Introduction to Securities and Markets

The video introduces the concept of securities and markets, explaining key topics such as the meaning of securities, market definitions, types of markets, and the characteristics of a good securities market. It outlines the agenda, starting with the definition of securities, followed by the definition of a market, the types of markets, and characteristics of a good securities market. The section also introduces securities as proofs of ownership or indebtedness in a company, with examples such as stocks and bonds.

05:03

💼 Definition of Securities with Examples

Securities are described as proof of ownership or indebtedness in a company. This section provides examples of securities, such as stocks and bonds. Stocks represent ownership in a corporation, where purchasing shares makes one a shareholder. Bonds, on the other hand, are debt instruments where the issuer borrows funds from an investor. The difference between stocks and shares is clarified, with 'stocks' used for general reference to any company, while 'shares' refer to ownership in a specific company.

10:06

🏪 Understanding Markets in a Business Context

This paragraph defines 'market' in a business context as a mechanism where buyers and sellers come together to transact goods and services. It emphasizes that a physical location is not necessary for a market to exist, especially in the case of online transactions. The critical factor is the communication of relevant details between buyers and sellers, such as the goods being sold and their prices.

15:12

🛒 Types of Markets: Overview

Markets are classified based on the type of goods or services traded. Examples include foreign exchange markets for currencies and securities markets for financial assets like stocks and bonds. Securities markets are further divided into categories like money markets, capital markets, stocks markets, bond markets, and derivatives markets. Each type of market serves different functions, such as short-term loans in money markets and long-term investments in capital markets.

20:12

💵 Money Market and Capital Market Explained

This section dives deeper into money markets and capital markets. Money markets focus on highly liquid, short-term financial instruments like treasury bills, commercial paper, and bank certificates of deposit, typically with maturities of less than one year. In contrast, capital markets deal with longer-term securities like bonds, stocks, and mutual funds, designed to finance long-term investments such as factories, highways, schools, and homes.

25:15

📊 Stocks Market: Equity Securities

The stocks market deals with equity securities such as stocks and warrants. Stocks represent ownership shares in a company, while warrants grant the holder the right, but not the obligation, to buy or sell a specified number of shares at a predetermined price within a set timeframe. Although warrants offer flexibility, holders are not obligated to act, giving them the option to exercise the right depending on market conditions.

📈 Bond Market: Long-Term Debt Instruments

The bond market is where long-term debt instruments like treasury notes, municipal bonds, and mortgage bonds are traded. Bonds are viewed as financial liabilities for the issuer and financial assets for the investor. Debt securities represent the obligation of the issuer to repay the borrowed amount, distinguishing them from equity securities, which represent ownership without debt.

📉 Derivatives Market: Financial Instruments Derived from Assets

The derivatives market focuses on financial instruments whose value is derived from underlying assets such as commodities, currencies, or interest rates. Examples include options and futures contracts. These instruments are considered executory contracts, meaning they represent promises to act in the future based on changes in the value of the underlying assets, essentially allowing participants to speculate on future price movements.

🔍 Characteristics of a Good Securities Market

A good securities market is defined by four key characteristics: transparency, liquidity, internal efficiency, and external efficiency. Transparency ensures equal and fair access to timely and accurate information. Liquidity allows securities to be quickly traded at prices close to the last transaction. Internal efficiency refers to low transaction costs, while external efficiency means that prices adjust rapidly to new information.

Keywords

💡Securities

Securities are financial instruments that represent ownership (like stocks) or a creditor relationship (like bonds) with a company or entity. They are proofs of one's ownership or indebtedness in a company. In the video, securities are explained using examples such as stocks and bonds, helping to illustrate their role in financial markets.

💡Market

A market is a mechanism that brings together buyers and sellers to facilitate the exchange of goods and services. In the context of the video, a market refers to any setting—physical or digital—where buyers and sellers meet to trade, whether it's for goods, services, or securities. Examples include stock markets or online markets, emphasizing that a physical location is not always necessary.

💡Stocks

Stocks represent ownership shares in a corporation. When someone buys shares of a company, they become a stockholder or part-owner of that company. In the video, stocks are described as a type of security, and the difference between 'stocks' and 'shares' is explored, showing how these terms can be used interchangeably in certain contexts.

💡Bonds

Bonds are a form of debt security where the issuer borrows funds from the investor with a promise to repay it at a later date. Bonds are considered contracts of debt and are used by companies or governments to raise funds. The video emphasizes bonds as a financial instrument representing indebtedness.

💡Money Market

The money market is a sector where short-term, highly liquid financial instruments are traded. These instruments usually have maturities of less than a year. The video mentions treasury bills and commercial paper as examples and explains that money markets help institutions manage temporary surpluses or shortages of funds.

💡Capital Market

The capital market is where long-term securities, such as bonds and stocks, are traded. This market finances long-term investments for businesses, governments, and households. In the video, the distinction between capital markets and money markets is made, with capital markets supporting projects like the construction of factories and schools.

💡Liquidity

Liquidity refers to the ease with which securities can be quickly bought or sold in a market without affecting their price. A liquid market allows transactions to occur swiftly and at prices close to previous trades. In the video, liquidity is highlighted as one of the key characteristics of a good securities market.

💡Internal Efficiency

Internal efficiency refers to the low transaction costs within a securities market, making it cost-effective for buyers and sellers to trade. The video explains that a good market is internally efficient if the costs of transferring securities are minimal. This includes lower costs for both trading and transferring ownership of securities.

💡External Efficiency

External efficiency describes how quickly a market adjusts to new information, ensuring that the prices of securities reflect all available information. The video emphasizes that a good securities market is externally efficient when prices are flexible and adjust quickly to new data, allowing for fair trading conditions.

💡Derivatives Market

The derivatives market deals with financial instruments whose value is derived from underlying assets such as stocks, bonds, or commodities. Examples include futures contracts and options. The video explains how derivatives are used to speculate on future price movements of these underlying assets, and how they are contracts rather than direct transactions.

Highlights

The definition of securities is ownership or indebtedness in a company or entity, represented by proofs such as stocks and bonds.

Stocks are shares of ownership in a corporation, and stockholders are part owners of the company.

The difference between stocks and shares lies in context: 'shares' often refer to specific companies, while 'stocks' refer to any company.

Bonds are contracts of debt between two parties, the issuer (borrower) and the investor (lender).

A market is a mechanism that brings together buyers and sellers for the transfer of goods and services, and it doesn't need a physical location.

In a market, buyers and sellers must communicate relevant details of the transaction, including the goods being traded and their price.

Markets are classified by the types of goods or services they trade, such as foreign exchange markets for currencies or securities markets for stocks and bonds.

The money market is designed for highly liquid, short-term instruments like treasury bills and commercial paper, with maturities typically under one year.

The capital market deals with longer-term securities, such as stocks and bonds, and is used to finance long-term investments.

The stock market is for trading equity securities, like stocks and warrants, where investors hold ownership shares in companies.

The bond market focuses on long-term debt instruments, such as treasury notes, bonds, and municipal bonds, with the issuer holding financial liability.

The derivatives market deals with instruments like options and futures contracts, whose value is derived from underlying assets like commodity prices and interest rates.

A good securities market is transparent, with equal and timely access to accurate information for all participants.

A liquid market allows securities to be traded quickly, with prices close to previous transactions.

Efficient markets have low transaction costs and adjust quickly to new information, ensuring prices reflect all available data.

Transcripts

hello and good day

our topic for today is securities

markets

definitions and concepts

this topic covers the meaning of

securities the definition of market

the types of markets and the

characteristics of a good

securities market

before anything else i would like to

give you the topic

outline for today's discussion first

what is the meaning of securities

second what is a market

third types of markets

and fourth characteristics of a good

securities market

without further ado let's start what is

the meaning of securities

when we say securities these are proofs

of one's ownership or indebtedness in a

company or

an entity in other words

capacity being securities

say some company or islam

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in order for you to better understand

securities

let me give you examples

two typical examples of securities

are stocks and bonds

stocks stocks

are shares of ownership in a corporation

stocks i shares when we say share

a share is the ownership interest

or right of a shareholder in an entity

when you

buy shares of a company

you become a stockholder or shareholder

of that company and when you become

a stockholder or shareholder of that

company

you become part owner of that company

so it on stocks or shares

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shares actually stocks and shares

are terms that can be used

interchangeably

meaning to say the montgomery shares

but take note specifically

there is a difference between stocks and

shares

study the following a

owns shares of coca-cola

company and b owns

stocks dietosa first

angina i shares

a second anginamit i stocks

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specific company therefore

the medium shares when you are referring

to

a specific company

so second walang nilagaya

na a specific company there is no

specific company therefore

gaga meeting with stocks when you are

referring to

any company not a specific

company and that

is the difference between stocks and

shares but take note

although specifically meron silang

pinakaiba

they can be used interchangeably

next bonds

a bond is a construct of debt

whereby one party called the issuer

borrows fund from another party

called the investor

ang bond i is a contract

of debt meaning to say

there is at least two parties

investor issuer

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he is the borrower of the fund

si investor in a man

so here between the issuer

and the investor

issuer

kai issuer

as you can see since bond is a contract

of debt

this is a proof that

there is an indebtedness

in a company or an entity

merong liability or death

si issuer kai investor

so those are the typical examples

of securities again

securities or proofs of one's

ownership or indebtedness in

a company or an entity

let us now proceed to the second

question what

is a market the market

that we are going to define here is not

the market

in research but rather the market in

business context when we say market

it is a mechanism that brings together

buyers and sellers to aid in the

transfer of goods

and services

in other words when we say market

it is anywhere where the buyers

and sellers come together

and transact with each other

of course for the purpose of buying and

selling

goods and services

a market does not necessarily

need a physical location for example

the transaction is an online transaction

in an online transaction between the

buyer

and seller the buyer

and seller can transact online

without the need of physical location

what is important here is that the

buyers

and sellers can communicate the relevant

details

of the transaction

therefore in a market hindi important

and physical location an important day

the buyers and sellers can transact

with each other

in a market it is important that

the buyers and sellers can communicate

the relevant details of the transaction

relevant details of transaction

for example the goods

being transacted

of course

they must agree on certain

goods of course hindi enough

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being transacted

in their transactions

and at the same time

it a transfer nagoods nang

seller of course another important

detail is the price of the goods

of course since their purpose

is to buy and sell goods and services

and services

as you can see the apartment meeting of

mines

the apartment agreement and their

agreement

should be communicated with each other

next types of markets

markets are usually designated by the

type of goods or services

that it trades hence a foreign exchange

market

is where currencies are sold and bought

while a securities market is where all

forms of securities

are traded that means

cleaner classify a market depending

on type of goods or services

of course food

such as meat fish chicken

vegetables etc

tina wakshang food market because

a food market i food

safari exchange market currencies

at the securities market of course

securities

securities markets can further be

classified into

the following first money market

second capital market

third stocks market

fourth bond market and fifth

derivatives market

i will discuss each securities market

one by one

let's start with the money market

money market is the market for highly

liquid

short term fixed income instruments

such as treasury bills commercial paper

and bank certificates of deposits

capacity now being short-term usually

young term

less than one year

so capacitor being money market item

market

designed for the making of

short term loans

actually it is the institutions

with temporary surpluses of funds

that meet the needs of borrowers who

have

temporary fund shortages

meaning to say human institutions

businesses or entities

now my shortage of funds

next capital market capital market

is the market for longer term securities

such as bonds stocks and mutual

funds this times a capital market

your maturity nang securities

are more than one year unlike

some money markets instruments or

securities

maturity in less than one year

capital market is designed to finance

long-term investments by businesses

governments and households

this is another difference

between capital market and money market

the basamani market and finance

is young short-term

investments orion manga temporary

investments perez capital market

this is designed to finance long-term

investments trading of funds in the

capital markets

makes possible the construction of

factories

highways schools and homes

next stocks market

stocks market is the market for various

equity securities

such as stocks and warrants

capacity capacitor being equity

securities

these are securities that represent

ownership shares

basically par as an investor

on equity securities a financial asset

person issuer an equity securities

i equity non issuer

examples non-equity securities are

stocks and warrants canadian disclosure

stocks

capacity being warrants or warrant

a warrant is a security

which grants the holder the right

but not the obligation to buy or sell

a stated number of underlying shares of

stock at a specified price

during a specified period of time

just like stocks a warrant is also

a security it grants

the holder the right but not the

obligation

to buy or sell a stated number of

underlying shares of stocks

meaning the same when warrant is bought

by one person or by the holder

merong right young holder event

shares of stocks at a specified

price during a specified period

of time

within that specified period of time

pero hindisha obliges

shares of stock

as a result he will not be

forced to sell or buy

that shares of stock at

a specified price during a specified

period

of time he has the right

but he has no obligation

it still depends upon the holder

of the waran kung

shares of a stock at a specified price

during a specified period of time

next bond market bond market

is the market for long-term debt

instruments

such as treasury notes treasury bonds

municipal bonds mortgage bonds and

debentures

capacity having debt securities or debt

instruments this is a

financial asset of the investor

and a financial liability of

the issuer

financial liability that's right in our

wagner that

securities or that instruments

because anthony none on the point of the

issuer

said that securities or that instruments

issuer and my financial liability

unlike the equity securities that's

white

equity inaudible i equity

non-issuer

and that securities and a debt

or financial liability none issuer

in equity securities yang young

equity non issuer

next derivatives market

derivatives market is the market

for derivatives or instruments whose

value are derived

from other underlying assets

examples of derivatives are options

and futures contracts

take note futures contracts

not future contracts

capacity derivative this is simply

a financial instrument that derives

its value from the movement in commodity

pricing foreign exchange rate

and interest rate of an underlying asset

or financial instrument

therefore as a financial instrument

you value non-derivative

i depend on some movement of

the commodity price foreign exchange

rate

and interest rate of the underlying

asset

or financial instrument

actually a derivative is

an executory contract capacitor being

executory contract

it is not a transaction but

an exchange of promises

about future action

expressed in the simplest terms

parties to the derivative financial

instrument

are taking bets on what will happen

to the underlying financial instrument

in the future next

characteristics of a good securities

market

has been the insecurities market

immaganda of course

it has to possess characteristics in

order for it to become

a good securities market

the question is what are these

characteristics

the following are characteristics of

what is considered

a good securities market first

transparent second liquid

third internally efficient and fourth

externally efficient unai anatomy

transparent

one attribute of a good securities

market

is that there is equal and fair access

to

information that means

all participants in the securities

market should have fair and equal

access to information

of course it's not enough equal

and fair access to information

the participants must have timely

and accurate information

for example dapat alumni participants

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in the current transaction

next liquid another feature

of a good market is that the securities

can be traded quickly and at a price

close to the prices of the previous

transaction meaning the same

human securities the securities market

ai madeleine mabenta

[Music]

omabelisna

in the previous transaction

next internally efficient

a good market should entail low

transaction costs therefore

paramasathen the internally efficient

young securities market

young transaction costs

securities market

another example is cost of transferring

the security young costs

transfer and security from

the seller to buyer should be

also low

and last externally efficient

a good market is one where prices

adjust quickly to new

information such that the prevailing

price

reflects all available information

regarding the security

that means externally efficient and

securities

market

securities market i

flexible in other words

the prices of securities can

adjust quickly to new

information

again the characteristics of a good

securities market

are transparent liquid

internally efficient and externally

efficient and that ends

the discussion in securities markets

definitions and concepts