THE FINANCIAL MARKET: The financial system is the set of intermediaries, markets, and instruments that link savings decisions with spending decisions, that is, they transfer income from surplus units to deficit units. It is the set of forces of supply and demand for savings, as well as the legal, economic and human, material, and technical channels and instruments through which savings are promoted and an efficient balance between such forces is allowed.
In the first place, it must be understood that the Latin American countries’ financial system is made up of institutions that carry out indirect financial intermediation (Commercial Banking, insurance companies, Financial Institutions) and direct (Stock Market), the latter operating in two markets that we will see later.
Through financial markets, we understand the set of channels of interrelation between the supply and demand of funds. Here we can distinguish, according to the term, between the money and capital markets, in the first, funds are offered and demanded in the short term, and in the second, in the medium and long term. term.
The money market refers to short-term capital.
The CAPITAL MARKET is the one in which all kinds of investments or transactions related to capital or financial assets are made, whatever their nature, characteristics, or conditions. Consequently, it is attended by bidders and seekers of short, medium, and long-term capital and even indefinite terms. The Capital Market is the market in which the sums saved are concentrated and channeled toward jobs where they remain immobilized for a long period. This market can be subdivided into the credit market and the stock market.
The first is a market between credit institutions and investors, in which the former use the resources deposited by individuals and companies. It is a direct negotiation market, closed to the public and with a privileged position of one of the parties.
In the stock market, also called the capital market in the strict sense, the lent funds are documented in securities, appealing to public savings, individuals, and companies in general, offering them a return to channel such funds towards productive investments. It is a trading market open to the public, without the borrower being in a disadvantageous position.
The credit market and the stock market are distinguished by the subjects. Thus, in the credit market, consumers can obtain funds while in the securities market, only companies and the state are recipients of funds. On the other hand, in the first of these markets, financial intermediaries obtain a margin or benefit by giving credit what they receive on credit, while in the stock market, there is no margin, only commission.
Regarding the object, in the credit market, only debt capital is contracted, while in the securities market risk capital (shares) is also contracted. Lastly, due to its form, the former is a fundamentally negotiated market while the securities market is fundamentally organized, although it is partly negotiated since the placement of issues can be negotiated, and partly non-negotiated since there is a market over the counter.
The stock market is inserted in the capital market, constituting a specialized segment thereof, in the sense that transactions relating to certain financial assets called marketable securities are centralized there. The instruments that are negotiated in the securities market can be issued with a determined expiration term, or not be subject to pre-established terms, as is the case of the representative shares of capital of corporations.
It must be taken into account that in the capital market there are always overlaps because a certain transaction, because it refers to short-term capital, belongs to the sphere of the money market, but additionally belongs to the incorporated or represented capital market. insecurities. The stock market is a specialized market that is part of the capital market, in which operations of a monetary or financial nature are carried out expressed in transferable values, a source of financing for the production of goods and services.
The stock market is the capital market in which these are instrumented in the form of securities. It is precisely this characteristic that has made these markets flourish. Indeed, the incorporation of the credit right to a negotiable title is what has allowed the accumulation of large capital and with it economic development. This growing importance of values is what has made the stock market appear and develop. In the stock market, transactions are carried out whose objective is to channel internal and external savings for their investment in productive activities, making them available to those seeking financing, especially – but not exclusively – in the medium or long term, or indefinitely. Then certain goods, the so-called securities, attend said market.
PRIMARY ISSUE MARKETS: We can define it as the market in which the applicants require new financing either through the issuance of equity-debt securities or through equity-risk securities. In the first case, foreign capital is used with the obligation on the part of the borrower to repay it within a certain period and repay it in the meantime with the payment of a fixed interest. In the second case, what there is own capital without mentioning amortization, the remuneration being variable and dependent on the result of the issuer.
It includes the issuance and placement of marketable securities, consequently, the volume of operations that are carried out in it, allows us to appreciate the flow of financial or capital resources channeled towards productive activities through the stock market or, said d in In other words, the degree of capturing savings through the mechanisms of the aforementioned market. The primary market is an alternative that companies can use to achieve self-financing through the issuance of shares, but it also offers the possibility of obtaining credit through the issuance of bonds and other titles.
In the primary market, first-issue securities are traded that are offered by companies to obtain fresh resources, either for the constitution of new companies or to inject new into ongoing companies.
The issuance is each set of negotiable securities from the same issuer and homogeneous to each other because they are part of the same financial operation or respond to a single purpose, including the systematic obtaining of financing because their nature and transmission regime are the same, and for attributing to their holders a substantially similar content of rights and obligations
Notwithstanding the homogeneity of a set of securities, it will not be affected by the eventual existence of differences between them about their unit amount, dates of release, delivery of material or pricing, placement procedures, including the existence of sections or blocks destined to specific categories of investors, or any other aspects of an accessory nature.
PUBLIC OFFERS FOR SALES OF SECURITIES: They will be considered a public offer for the sale of securities not admitted to trading on an official secondary market, the public offering, on its account or behalf of third parties, whatever the procedure may be, provided that one of the following conditions is met: assumptions.
Public offerings of securities require their prior registration in the Registry, except in the case of securities issued by the BCR and the central government. In public offerings of securities, the intervention of an intermediation agent is mandatory (art. 49)
Primary public offering of securities is the offer of new securities made by legal entities (Art. 53)
PLACEMENT: For the placement of issues, any appropriate technique may be used at the issuer’s choice. The placement procedure must be defined and made public in all its extremes before proceeding with it. The same principles of freedom, the prior definition of publicity, will be applied to the choice of the group of potential subscribers to whom the broadcast is offered and respecting the deadlines provided by law.
MODIFICATION OF SECURITIES IN CIRCULATION: Any modification of securities already issued that implies an alteration of the rights or obligations of their holders, of the conditions of exercise or fulfillment of one or the other, of the guarantees of the issue or any other substantial element thereof, will be subject to compliance with the presentation of the agreement of the general meeting to Conasev.
SECONDARY MARKET: It is where the transfers of titles and values that have been previously placed in the primary market are executed, giving liquidity, security, and profitability to investors and allowing them to reverse their purchase and sale decisions. It is one where investors exchange previously issued titles. It is therefore a realization market, without which the existence of the primary market would be difficult since it would be difficult to subscribe to the issues of financial assets if the possibility of liquidating the investment by transmitting them did not exist. Therefore, it provides liquidity to investments, but without directly affecting their financing.
However, neither can we consider that secondary markets have a passive role. On the contrary, there is a certain interrelationship between primary and secondary markets. In addition to the liquidity effect, there are other interactions. Thus, the events of the secondary market determine the bases and conditions of the issues through the negotiation of preferential subscription rights.
The subsequent negotiation of titles, that is, the exchange of previously issued and placed securities; in other words, this is the level at which transactions relating to the papers that are already in circulation are carried out. Consequently, at the secondary level transactions are carried out that imply simple transfers of already existing financial assets, and, therefore, the volume of such operations reflects the degree of liquidity of the stock market.
It follows that the primary and secondary markets are reciprocally complementary and must coexist, that is, without the possibility of being able to transfer the value acquired in the first placement and consequently without the liquidity that could be required at a given moment being feasible, counting only on the As an alternative to enjoying an income or waiting for the maturity of the paper, the attractiveness of acquiring marketable securities in first placement would decrease significantly.
PARALLEL MARKETS: As we will see, secondary stock markets can be official or unofficial, in the first case we are dealing with stock markets, and in the second case with parallel markets.
Although the stock market arises as a need for merchants, its subsequent development requires a series of technical or legal mechanisms to surround it with greater legal and economic security. All this formalization entails a series of obstacles and requirements that are tried to be avoided with the creation of new markets, generally close to the stock market, but much more accessible. These types of markets, which lack official transparency, are called parallel markets.
These markets can even arise within the Stock Exchange itself, as occurs in regulated markets. They are then basically acclimatization markets in which less rigorous requirements are required for admission than in the official market so that, after a certain time, they can comply with the requirements for access to the first market. These markets also emerge as alternative ways of financing for small businesses and through companies that are excessively dependent on bank credit, and that tend to finance medium- and long-term investments with short-term loans, all of which leads to an excessive scarcity of financing means.
In the USA, there are over-the-counter denomination markets, markets without a physical location, which operate through an electronic network, in France, the Second Marché, for companies that do not wish to participate in the official market.
THE STOCK MARKET: The Stock Market is a first approximation to the stock market, with the characteristics of official, organized, and open. On the one hand, it is more restricted than the stock market, since it does not cover the entire primary market and part of the secondary market is outside the Stock Market. But on the other hand, it is broader since the stock market extends to areas bordering the money market, as occurs with the negotiation of bills of exchange and promissory notes. In addition, the credit system in spot operations connects the money market and the stock market.
The market is classified as the stock market and over-the-counter, according to whether the transactions related to transferable securities are executed on the premises of the stock market and the trading floor, or are carried out outside the stock market or at its facilities, but in this case not using the mechanisms of the wheel, but the so-called centralized or organized over-the-counter markets, that is, the trading table and the products table. It is where previously issued securities purchase and sale operations are carried out, with the Stock Market being the institution that centralizes said operations.
Elements of the Stock Market are subjective, here are individuals, companies, financial entities, and institutional investors (companies and investment funds, insurance companies, AFPs). On the other hand, there are the issuers that are fundamentally large companies and the State, and finally, the intermediaries that are the SAPs and Intermediation Agents. The objective elements are the contracting centers and the securities subject to negotiation. The formal elements are constituted by the formal procedures and rules of the relationship between the previous elements.
OVER-THE-COUNT MARKET: Registers the purchase and sale operations carried out outside the circles governed by the stock market. The trading table is located in this market, the purpose of which is to give a part of it the advantages of an organized market such as the stock market.
STOCK EXCHANGE: The Stock Exchange is the most important service institution in the stock market, not only because it is a non-profit civil association, but also because a large number of securities are traded on it, through stockbrokers. who, after receiving the purchase and sale orders from their clients or principals, carry out the corresponding transactions in the daily sessions of the stock exchange, negotiation table, and products table
STOCK EXCHANGE WHEEL: This is the name given to the daily meeting of the negotiation of values previously registered in the records of the stock market; These securities are mainly made up of capital or common shares, labor shares, as well as preferential subscription certificates and bonds.
TRADING DESK: Facilitates the transaction of securities not registered on the stock market and gives natural and legal persons the possibility of investing their savings in securities that yield benefits higher than those of the traditional market, call them dollars, banks, etc., which serves as a complementary mechanism to financing where companies negotiate their short-term prices, especially in situations of low liquidity. Here, the main thing is the negotiation of short-term instruments (promissory notes, bills of exchange, treasury bonds, etc.) issued by companies and financial institutions.
PRODUCTS DESK: Over-the-counter operation implemented by the Lima Stock Exchange to allow intermediation agents to negotiate securities, representative of products that are traded in the country, coffee, sugar, potatoes, silver, etc. amenities.
ORGANIZATION OF THE SECURITIES MARKET IN THE Securities Market Law
D. Leg. 861 22.10.96
Transferable Securities: Transferable securities are those issued en masse and freely negotiable that grant their holders credit, nominal or equity rights, or those of participation in the capital, equity, or profits of the issuer (Art 3)
Public Offer: Of transferable securities is the adequately publicized invitation that one or more natural or legal persons address to the general public or certain segments of it, to carry out any legal action related to the placement, acquisition, or disposition of transferable securities (Art. 4 )
Private Offer: The one not included in the previous article, that does not use mass media, directed to institutional investors, offers whose nominal value does not fall below 250,000 soles
Intermediation: Of transferable securities, the usual operation of buying and selling on behalf of others, placement, distribution, or brokerage; or the acquisition on its account to be placed later, with a price differential.
Public Registry of the Stock Market: Securities, issuance programs, mutual funds, and investments are registered to provide the necessary information, the registry is kept by Conasev, and the information is freely accessible.
Registration of securities: Those of public offer, optionally those that are not carried out in the public offer, the registration of the values does not imply attesting to the goodness of the same.
Obligation to report material facts: These are the facts that may influence the decision of a reasonable investor.
Reserved Information: When this may cause harm to the issuer
Exclusion from the registry: By charge of Conasev
Privileged Information and confidentiality duty: (Art 40) Any information from an issuer referring to it, its business, or one or more securities issued or guaranteed by them, not disclosed to the market and whose public knowledge, by its nature, is capable of to influence the liquidity, price, or listing of the securities issued. That information is available on the acquisition or disposal operations to be carried out by an institutional investor in the stock market, as well as that referred to the takeover bids. Reserve exceptions, operate about the directors of Conasev and clearing and settlement institutions, intermediation agents, and members of the boards of directors of the exchanges.
Public Offerings (Articles 49 to 52): Require the registration of securities in the registry, except in the case of securities issued by the BCR and central government. In public offerings, the intervention of an intermediation agent is mandatory (issuers may do so directly and in the primary placement of investment funds and mutual funds).
Primary Public Offering (Articles 53 to 63): A primary public offering is the offer of new securities made by legal persons, registration requirements, an information prospectus, and a nine-month term.
Secondary Public Offering (Art. 64): Its purpose is the transfer of previously issued and placed securities. The public purchase offer, public sale offer, and public exchange offer constitute a secondary public offer.
Public Sale Offer (Articles 65 to 67): That made by one or more natural or legal persons to transfer to the general public or certain segments of it, previously issued and acquired securities. Requirements, information prospectus to Conasev, registration of securities in the registry.
Public Offer of Acquisition and Purchase (Art. 68): The natural or legal person who intends to acquire directly or indirectly in a single act or successive acts, several shares with voting rights registered in the stock market, or convertible bonds, Subscription rights or other securities that may give the right to subscribe or acquire such shares to achieve a significant stake in said company, must carry out a takeover bid addressed to the holders of said company.
Public Purchase Offer by Exclusion (Art. 69): The exclusion of security from the registry determines the joint and several obligations of those who were responsible for it, to carry out a public purchase offer addressed to the other holders of the security.
Previous offers are irrevocable.
Whoever acquires by public offer and does not comply with the indicated requirements (Art 72) is suspended in the exercise of their rights and forced to sell by public offer in two months.
Voluntary Takeover Public Offer: This system can be used for any security, and in the cases contemplated in art. 68 as long as they are registered in the registry.
Public Exchange Offer (Art. 75): Refers to the sale or acquisition of securities when the consideration is offered to be paid entirely in securities; The exchange of securities that is proposed must be clear as to its nature, valuation, characteristics offered in the exchange, as well as the proportions in which they must be produced.
International Offers General provisions of Conasev.
Transferable Securities: They can be represented by book entries or titles
Execution of Representative Securities: debt securities constitute execution titles without requiring your protest, this rule does not apply to bills and promissory notes.
Registered Shares (Art.83): The registered shares must be registered in a stock exchange.
Shares in the Portfolio: The total number of shares of the issue itself maintained in the portfolio may not exceed ten percent.
Bonds: The public offering of debt securities with a term greater than one year can only be carried out through bonds, subject to the provisions of this law and the provisions on the issuance of obligations contained in the Companies Law. Bonds may be issued by said provisions, even by private legal entities other than corporations.
All bond issues require a bondholder representative.
Short-Term Instruments: Short-term instruments are debt securities issued for terms of no more than one year and can be issued through titles and book entries.
Promissory notes, bills of exchange, or other representative values represented by Conasev can be used as short-term instruments.
Centralized Trading Mechanisms: Centralized trading mechanisms are those that bring together or simultaneously interconnect several buyers and sellers to trade securities.
The values that are negotiated in the centralized mechanisms are irrevocable.
Stock Exchange: It is the centralized mechanism in which private companies carry out transactions with securities registered in the registry and the respective stock exchange. It is led by a stock exchange official, called a wheel director, who is responsible for resolving controversial issues that arise with the final decision.
It is prohibited to acquire or dispose of securities registered on the stock market for valuable consideration.
Securities listed on the stock market can be traded outside of said mechanism. In these cases, the competition of an agent company is required, which must certify the transaction and timely settlement of the same, indicating the amount, price, and date, this information must be delivered to Conasev.
Other Centralized Trading Mechanisms: Other centralized trading mechanisms are considered to be those whose purpose is to trade securities not listed on the stock market, where brokerage agents must intervene.
Stock Market: The stock markets are public service civil associations made up of agent companies whose purpose is to facilitate trading.
Functions of the Bag:
– Register and register securities for trading on the stock exchange,
as well as exclude them.
– Promote the transaction of securities.
– Propose to Conasev the introduction of new products and provide services.
– Provide infrastructure.
– Provide truthful and accurate information
– Resolve conflicts in the first instance.
– Promote conciliation.
– Heritage S/4’000,000.00
The Stock Exchange has associates whose certificates of participation can be transferred in the stock exchange, have no nominal value, and a guarantee of the certificate of participation is given in addition to extraordinary fees.
Guarantee Funds: Every stock exchange must maintain a guarantee fund to support the operations of the agents.
Intermediation Agents: They are intermediation agents, corporations that as intermediary companies are dedicated to intermediation in the stock market, require authorization, are required to have a duty of diligence and loyalty, relationship with the principals, and are governed by the mercantile commission; that is to say that all intermediation activities are the result of commissions and orders from their clients through written orders.
Stockbroker Companies: These are companies dedicated precisely to the intermediation of securities, due to their special nature, they require a share capital.
Their purpose is to buy and sell securities on behalf of third parties and their account in centralized centers and mechanisms and they are empowered to:
– Place securities in the national or international market.
– Place securities in the country issued abroad.
– Initially subscribe to the primary issues
– Act as the representative of the bondholders
– Manage mutual and investment funds
– Custody securities
– Grant momentary credits
– Act as trustees in securitization
