securities

Examples of securities in the following topics:

• Managing Marketable Securities

  • Marketable securities are securities that can be easily liquidated without any delay at a reasonable price.
  • Realistically, management of cash and marketable securities cannot be separated.
  • There are four factors that influence the choice of marketable securities.
  • Maturity: Marketable securities held should mature or can be sold at the same time cost is required.
  • Because these securities are generally held either for specific known need or for use in emergencies, the portfolio should consist of highly liquid short-term securities issued by the government or very strong corporations.

• Securities Act of 1933

  • If person A registers a sale of securities to person B, and then person B seeks to resell those securities, person B must still either file a registration statement or find an available exemption.
  • Many transactions are exempt from regulation under the Securities Act.
  • For public offerings, the main requirement of the Securities Act is registration.
  • the average weekly reported volume of trading in the securities on all national securities exchanges for the preceding four weeks
  • Securities and Exchange Commission (frequently abbreviated SEC) is a federal agency, which holds primary responsibility for enforcing the federal securities laws and regulating the securities industry

• Securities Exchange Act of 1934

  • The Securities Exchange Act of 1934 is a law governing the secondary trading of securities, financial markets and their participants.
  • The 1934 Act also established the Securities and Exchange Commission (SEC), the agency primarily responsible for enforcement of United States federal securities law.
  • While the Securities Act is very limited in scope, the Securities Exchange Act (also known as the Exchange Act or 1934 Act) is much broader.
  • In contrast with the Securities Act of 1933, which regulates these original issues, the Securities Exchange Act of 1934 regulates the secondary trading of those securities between persons often unrelated to the issuer, in most cases through brokers or dealers.
  • Define how the Securities Exchange Act of 1934 regulates the US securities markets

• Defining the Security Market Line

  • The security market line displays the expected rate of return of a security as a function of systematic, non-diversifiable risk.
  • The security market line graphs the systematic, non-diversifiable risk (stated in terms of beta) versus the return of the whole market at a particular time, and shows all risky marketable securities.
  • The security market line is defined by the equation:
  • All the correctly priced securities are plotted on the SML.
  • This is an example of a security market line graphed.

• Convertible Stock

  • A convertible security, such as convertible preferred stock, is any security that can be converted into another.
  • This refers to any security that can be converted into another security.
  • Convertible securities can include bonds that pay interest or preferred stocks that pay dividends.
  • The conversion is exercised at the security holder's discretion.
  • The shareholder can also sell the original security and use the conversion feature as a favorable selling point .

• Underwriter

  • Investment bank underwriters help securities issuers lessen their risk in exchange for a premium.
  • Thus, there is a risk to the company in the offering of securities.
  • For all types of securities, whether offered by companies or the government, there is a risk that the issuer may not be able to have a successful securities offering.
  • That is where the job of the security underwriter comes in.
  • In essence, the underwriter buys the securities from the issuer and then turns around to sell the securities on the market.

• Securities Acts Amendments of 1975

  • The 1975 amendments are to establish a national market system for the nationwide clearance and settlement of securities transactions.
  • In the United States, national market systems are governed by section 11A of the Securities Exchange Act of 1934.
  • Information on each securities trade is sent to a central network at the Securities Industry Automation Corporation (SIAC) where it is then distributed and consolidated with other trades on the same "tape".
  • The Securities Industry Automation Corporation (SIAC) is a subsidiary of the NYSE Euronext.
  • Define how the Securities Act Amendments of 1975 regulate U.S. stock markets

• Federal Open Market Committee

  • Dealer who bought the security has no obligation in the future to sell the security to the Fed or vice-versa.
  • Usually, the dealer buys back the government security within 15 days.
  • The Fed sells securities to the dealers, and the dealers sell the securities back to the Fed for a specific price and on a particular data in the future.
  • First, the Fed can completely control how many securities it buys or sells.
  • The Fed can influence bank reserves by a little amount by buying few U.S. government securities or by a large amount by buying many securities.

• Shelf Registration

  • Shelf registration is a type of public offering in which the issuer is allowed to offer several types of securities in a single prospectus.
  • The prospectus (often as part of a registration statement) may be used to offer securities for up to several years after its publication .
  • These five different classes or series of securities are offered in a single document.
  • Shelf registration is usually available to companies deemed reliable by the securities regulation authority in the relevant country.
  • Some of the securities in the prospectus can be "shelved," and sold later.

• The Capital Asset Pricing Model

  • The capital asset pricing model (CAPM) allows us to price risky securities in order to determine if an investment should be undertaken.
  • The beta of the security is 1.9.
  • In real world applications, it enables us to determine whether or not a security is a worthwhile investment by comparing the expected rate of return of the security, given by the CAPM equation, with the actual rate of return.
  • Deal with securities that are all highly divisible into small parcels.
  • Further, the model assumes that past returns will effectively predict the future risk associated with a given security.