In the economic systems of modern states, exchanges play the most important role - first of all, stock and currency exchanges. They function by concluding special transactions between participants in the trade relations. What are their features? How is the work of exchanges that ensure the conclusion of transactions between financial market players arranged?
What is the essence of an exchange transaction?
Under the exchange transaction it is customary to understand the contract concluded between the seller and the buyer of a product or asset in the stock market within a specific trading session. Corresponding legal relations should be carried out within the framework of the established rules. If the exchange transaction is concluded with violations, it may be canceled. Or, a fund organization that provides contracts can relinquish responsibility for the legal consequences of an agreement between traders. But the main task of the corresponding structure, the exchange, is to organize mutually beneficial interaction between sellers, buyers of goods and assets, and sometimes intermediaries, in which all participants in the trade are interested.
The exchange is a financial institution that plays an important role in terms of the distribution of capital in a particular segment of the economy. Within it, investment capital, valuable data from different sectors of economic processes are concentrated. Information can actually appear on modern exchanges that is useful not only for traders, but also for financiers of a different profile - for example, those engaged in analytical researchers in the field of economics.
Participants in exchange transactions draw up legal relations in writing, drafting agreements between themselves or through brokers (the second option in modern stock trading is more common and it is used, as a rule, in an online format). The relevant documents must in their structure and content meet the criteria established by the legislation of the state in whose jurisdiction the contracts are concluded.
An exchange transaction is concluded only by traders, without the direct participation of a fund organization (but according to its rules, which are established in the interests of trading participants). Under the relevant contract, the parties determine the terms for the sale of goods or assets, as well as the main characteristics of the property being sold.
Varieties of exchange transactions
Transactions, depending on the conditions defined by traders, can be presented in the following varieties: forwards, futures, options, standard transactions, special contracts. We will study these types of exchange transactions in more detail.
A forward, which is one of the most common types of trading contracts, is a contract through which partners determine the deferred terms of delivery of a product or asset - they must be made in the future under the conditions established at the time of the forward transaction.
Futures is a forward subspecies that characterizes the delivery of a “classic” exchange commodity - as a rule, it is a stock issued by a company. That is, real delivery of something is not supposed.
An option is a stock exchange transaction, under which the assignment of rights to receive a specified amount of powers or obligations under one or another exchange contracts in the future is carried out.
A standard transaction involves the purchase or sale of goods at the time of signing. The special one is subject to conditions determined by the exchange or trading partners, based on the characteristics of the sphere of legal relations, the goods sold, the asset and other factors affecting the interaction of the parties under the contract.
Cash and derivatives contracts
There are other criteria to determine certain types of exchange transactions.
So, the classification of contracts for cash and urgent is widespread. The first include transactions that are subject to execution at the time of their conclusion. As part of cash contracts, settlements between partners are usually made on the day the transaction is concluded. But sometimes the resolution of financial issues by the parties is possible a few days after the transaction is completed: the laws of some countries of the world spell out the rules according to which cash contracts can include those for which settlements are carried out deferred.
Transactions classified as derivatives are characterized by:
- fixed terms for making settlements;
- specific pricing terms for traded goods and assets;
- a fixed mechanism of detention.
Regarding the term: it can occur, for example, at the end or middle of the billing month or set on a certain date. Sometimes - fixed in relation to a specific number of days after signing the exchange contract.
Regarding the price: it can be set directly upon the sale of a product or asset, on a specific date or based on current market indicators.
The conclusion mechanism is the most important characteristic of exchange transactions. It may involve the signing of firm, contingent, extended or special contracts.
Speculative contracts
Along with the deals under consideration, there are those that are classified as speculative. What are their specifics?
The speculative contracts are those that are aimed at making traders profit through fluctuations in the prices of goods and assets. In many modern stock markets, the main goals of exchange transactions are to earn money through speculation.
The fact is that the relevant financial institutions suggest the participation of traders in legal relations on the most ambitious markets - foreign exchange, or in the area of transactions with securities of major corporations.
Having studied the concept of exchange transactions, we consider the specifics of their subjects and objects.
Subjects and objects of exchange transactions
So, stock market operations are conducted in accordance with certain rules. They form the mechanism in accordance with which the transactions in question are concluded. It involves the interaction of various subjects of legal relations. These include:
- traders
- founders of exchanges;
- brokers.
Their interaction involves working with various transaction objects:
- goods;
- raw materials;
- stocks;
- derivatives;
- currency.
The main tasks that are solved through the establishment of a transaction mechanism are ensuring freedom of concluding contracts based on the competitive price of goods and assets, maintaining a balance of supply and demand in the market. The bidders in this case play a crucial role - they assist traders in legal procedures when concluding transactions, and advise bidders on emerging issues.
Exchange Classification
It will be useful to study the basic criteria for classifying exchanges as the main financial institutions within which the transactions in question are concluded. So, researchers classify exchanges based on:
- lists of goods and assets that are sold on it;
- support of various forms of participation of traders in transactions;
- the prevailing types of goods and assets sold on the exchange and the types of transactions that are most often concluded on it.
Exchanges can be classified based on the objectives of the participation of traders in legal relations. So, there are financial organizations, with the participation of which the main types of exchange transactions are aimed at profit from capital management - for example, by obtaining interest on intermediary services. There are also non-profit structures whose work is aimed at developing the stock market as a whole and does not imply setting a priority task in the form of profit.
Exchanges are also classified based on the variety of goods and assets sold under contracts concluded by traders. Most often, according to the corresponding criterion, there are 3 types of financial organizations in question - universal, stock, and currency.
The role of the state in the activities of exchanges
Another criterion for classifying exchanges is the degree to which the state is involved in their activities. So, there are free financial institutions, and there are those that operate according to regulations defined at the legislative level. In this case, the state may determine the procedure for concluding exchange transactions, and regulate the conditions for admission to participation in the relevant legal relations.
The interest of the authorities in this case may lie in the formation of the legal conditions of trade attractive to domestic and foreign investors, who can channel capital to the jurisdiction of the national stock market. But solving this problem also involves carrying out work in the field of improving fundamental economic indicators. First of all, sustainable GDP growth, its timely diversification.
In order to make the country's stock markets attractive, the state must prepare a macroeconomic basis for this. Especially if you intend to attract primarily foreign investors. It should be noted that most of the largest exchanges are still regulated by states at the level of national laws or international treaties. Regardless of the economic component of raising capital, effective legal regulation of exchange transactions is the most important condition for the interaction of financial market players.
Commodities and assets on exchange transactions
Let us consider in more detail what goods and assets can be sold in the framework of such a legal relationship as an exchange transaction. So, they can be represented:
- manufactured goods;
- raw materials;
- agricultural products.
Using exchange mechanisms, which are based on free pricing based on the balance of supply and demand, the value of the relevant goods is determined. Depending on the rules of the exchange, it may be mandatory or recommended for participants in transactions.
Regarding assets: those on exchanges are most often publicly traded companies. As a rule, they are traded within the national stock markets as part of specialized listings.
Exchange Operations
Having examined the concept and types of exchange transactions, we can study the list of basic operations that are carried out as part of stock trading. These include:
- buy and sell;
- listing and delisting;
- conclusion of contracts;
- quoting;
- pledged assets;
- providing settlements;
- clearing;
- provision of consulting services;
- cash storage;
- issue of securities.
Each of these operations is important from the point of view of ensuring the legitimate interaction of participants in exchange transactions.
The specifics of stock exchanges
The main financial institution under which the contracts in question are concluded is the stock exchange. It will be useful to study the specifics of her work.
As we noted above, exchange transactions are those contracts that are concluded according to the rules of the trading founder.Thus, the main task of the stock exchange is to develop these rules, as well as to ensure their observance by building a system of effective communications with bidders.
Stock exchanges also have other significant tasks, such as, for example, managing financial flows, ensuring investment liquidity and protecting the interests of traders within the legal mechanisms established by the legislation of the state in whose jurisdiction the exchange operates.
It will be useful to consider the key principles of the functioning of the relevant financial institution. Experts distinguish their following combination:
- publicity of the rules;
- stability and regularity of work;
- voluntary participation of traders in legal relations.
The essence of exchange transactions is in the interaction of financial market players, which is carried out on the basis of the indicated principles. If they are not respected, then the contracts may no longer be considered as exchange ones.
Stages of exchange trading
Consider the stages in which legal relations are carried out with the participation of traders. So, the participants of exchange transactions, which are buyers, primarily carry out such actions as:
- filing applications for the purchase of goods or assets;
- practical introduction of positions in the trading process;
- participation in registration of transactions;
- settlement of contracts.
In turn, if the party to the transaction is a seller, then he solves such problems as:
- listing of goods and assets;
- execution of applications for the sale of goods and assets;
- practical introduction of own positions in the trading process;
- participation in registration of contracts;
- settlement of transactions, delivery of goods or assets.
Exchange Pricing
Prices in the framework of exchange transactions are based on three main mechanisms:
- based on agreements between traders;
- based on market patterns that are formed on the basis of factors that are characterized by a macroeconomic nature;
- by auction principle.
It can be noted that contract prices, one way or another, in most cases are guided by market indicators. They are usually considered as the main source of information for determining the terms of the contract.
Exchange transactions are also those contracts that are concluded as part of auctions. We study the features of these financial institutions in more detail.
Features of exchange auctions
Exchange auctions are classified into 2 main varieties - ordinary and double. The first include auctions in which:
- sellers compete with each other in the context of relatively low demand for goods and assets;
- customer interaction is observed when demand is too high.
The classic, British version of the auction involves an increase in the price of the product or asset from the minimum to the one at which the sale is carried out. Applications of participants in transactions in the status of sellers may be submitted before the auction actually begins. In this case, a quotation list of prices is formed. The size of the step within which the auction price of a product or asset grows is usually determined in advance. As a rule, this is a certain percentage of the initial price. As soon as the buyer offers the maximum amount of money offered, the product or asset is sold.
Equally common exchange transactions and double auctions. They involve the mutual competitive interaction of sellers and buyers. Goods or assets are bought at the maximum price, sold at the minimum.
Summary
So, we studied the main features of exchange transactions, explored how the financial institutions operate, within which the relevant contracts are concluded. Legal relations with the participation of traders should be established according to the established rules.
An exchange transaction is a contract that is concluded on time for a specific product or asset on terms with which both parties agree. The subject of the contract may be one or another type of raw material, agricultural products, currency, securities of companies.
Exchange transactions are also contracts in the format of auctions, when the price of goods or assets is determined based on the priorities of sellers and buyers. The basis for determining prices may also be the balance of supply and demand, which is formed under the influence of factors, the appearance of which depends on how certain macroeconomic processes go.
