Securities

What is meant by ‘Securities’?

A security is a transferable, negotiable instrument representing financial value. Once security is issued it can have multiple owners. Eg. like company issues shares which can have many shareholders.

Securities can be categorized in many ways:

Case 1 : Debt and equity

• debt securities (such as banknotes, bonds and debentures). Here one party borrows money from other party and returns the principle amount on particular date with particular interest. In this case, lender of the money has little or no control over the management of the borrower.
• equity securities, e.g., common stocks; and derivative contracts, such as forwards, futures, options and swaps. The company or other entity issuing the security is called the issuer. The holder of an equity is a shareholder, owning a share, or fractional part of the issuer.

A country's regulatory structure determines what qualifies as a security. For example, private investment pools may have some features of securities, but they may not be registered or regulated as such if they meet various restrictions.
Debt vs Equity
At various times in the life of a company there are going to be requirements for outside assistance in order to grow the business. Deciding whether to seek out equity capital or debt financing is the first step. Usually companies trying to get equity capital are very early stage with little or no real assets. While companies on their way to a steady growth curve use debt financing.
Debt is paid back to the lender irrespective of the company's fortune(short of bankruptcy). On the contrary the value of shareholding in a company depends on the success of the company. 
In event of failure, any proceeds of liquidity are used initially to repay borrowing and then remaining is distributed among shareholders.

Case 2:  Certified and non certified, bearer and registered
Securities may be represented by a certificate or, more typically, "non-certificated", that is in electronic or "book entry" only form. 


Case 3 : Bearer and registered

• Certificates may be bearer, meaning they entitle the holder to rights under the security merely by holding the security. Transferring the security is merely the matter of physical transfer of certificates. 
• registered, meaning they entitle the holder to rights only if he or she appears on a security register maintained by the issuer or an intermediary i.e. legal ownership resides with the person on the security register. Transferring the ownership involves registrar of notifying the registrar of appropriate transactions. They include shares of corporate stock or mutual funds, bonds issued by corporations or governmental agencies, stock options or other options, limited partnership units, and various other formal investment instruments that are negotiable and transferable.

Key Markets

The following sections represent brief introductions to specific markets. Much more detail is available in the specific tutorials covering individual areas.

• Equities
• Bonds
• Short-Term Debt Securities
• Interbank Deposits and Syndicated Loans
• Foreign Exchange
• Commodities
• Securitized Assets
• Derivatives