Securities and Stock Exchange

1
Securities and Stock Exchange

• Stocks and Bonds

2
Securities

• Documents acknoledging the investment of money in
  either the money market (up to 3 years) or the
  capital market (3 years and longer
• Securities are transferable certificates of
  ownership or indebtedness
• Primary market market where securities are
  issued for the first time
• Secondary market market where investors meet to
  trade (buy and sell) securities at the actual
  market price

3
Debt securities

• Represent creditorship rights
• Bonds (debentures)
• Mortgage bonds
• Municipal bonds or local bonds

4
Equity securities

• Represent ownership rights
• Shares
• Investment or mutual fonds shares
• Dividend rights certificates

5
Special forms

• Special types of securities which are a mixture
  of the two mentioned above
• Participating certificates
• Convertible bonds
• Warrant bonds
• Futures
• Options

6
Basic differences between equity and debt
securities
7
Debt securites

• Represent loan capital
• Acknowledge the right to repayment
• Entitle to receive interest
• Are issued by public bodies and banks
• Largest issuer (in Austria) Republic of Austria

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Bonds

• IOU (I owe you) note given by a borrower to a
  lender
• By purchasing bonds an investor becomes a
  creditor (not a part-owner) to the issuing
  corporation or public body.
• The bondholder has a claim on the repayment of
  the capital invested at the end of the bonds
  period
• Has a claim on interest payment during the bonds
  period and
• Must be paid off in full before anything is paid
  to the companys owners if the complany gets into
  financial trouble and has to be resolved.

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Types of bonds

• Public placements general public is invited to
  subscribe to these bonds the more investors
  subscribe the better the placing. A high level of
  investor diversification helps to limit the
  danger of collapses in prices at the stock
  exchange which may be caused by large quantity
  sales
• Private placement the bonds issued are not
  offered to the general public are only
  addressed to large-scale investors such as
  institutional investors or asset management
  companies

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Types of bonds

• Concerning the form of interest payment
• Straight bonds bonds guarantee a fixed annual
  interest rate
• Floating rate notes (vario bonds) the rate of
  interest is variable and adjusted regularly to
  the current level of interst
• Zero bonds (premium bonds) no interest payments
  are made during a bonds period, e.g. issuing
  price 54 , redemption after 10 years at 100
  (typical zero bond) issuing price 100 ,
  redemption after 8 years at 185 (premium bond)

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Types of bonds

• Concerning the issuer of bonds
• Public bonds issued by the government or other
  local authorities in order to raise the funds
  required for large investments (housing or road
  construction)
• Bank bonds issued to raise the financial means
  necessary for granting loans
• Corporate bonds issued by large enterprises to
  raise long-term finance