Introduction Of Securities And Their Types

Date: Mar 06, 2023, 15:44

Securities are exchangeable and negotiable financial instruments that have some kind of monetary value.

The term securities sometimes represents shares, sometimes it indicates being a creditor from a government body or a company, which in this case takes the name of bonds; And sometimes it displays property rights in the form of option transactions.

Note that all assets are not securities, but only a few limited items such as stocks, bonds, etc. are included in securities, and items such as permanent or temporary housing insurance are not included in securities.

Important Keys:

• Securities are tradable and exchangeable financial instruments that are sold by public and private companies in primary markets to raise capital.

• First of all, there are 3 types of securities:

1. take stock; which gives the right of ownership to the stockholders.

2. Debt; which basically includes loans that are repaid periodically.

3. hybrid; which combines equity and debt components.

• Public sales of securities are regulated by the Securities and Exchange Commission.

Types of securities

In general, securities are divided into two distinct types: equity and debt. However, there is also a type of hybrid securities that combines the characteristics of equity and debt.

How to deal with securities

Securities are generally traded in stock exchanges or the stock market; Where issuers of securities list and sell their securities in their respective sections, ensuring a highly liquid and regulated market for trading. In recent years, informal electronic trading systems have become much more popular, and today, securities are also bought and sold online or even by phone among investors and traders.

An initial public offering (IPO) represents the first major sale of securities (mostly shares) of a company to the general public. After the completion of the IPO stage, the holders of the securities offered in the primary market can now keep their securities and obtain their contents or sell their securities in the secondary market and liquidate their assets.

In some cases, securities are sold secretly to a specific and limited group, which is called "private placement of shares". Private stock offering is a type of initial offering that is sold privately to a limited number of people, including relatives, friends and reputable investors. It should be noted that sometimes companies offer their securities to the market in a combination, i.e. both private and public.

After the initial public offering, bondholders can easily trade their bonds. Of course, this does not apply to people who have acquired their bonds in the private offering of shares; Because they cannot sell their papers to anyone easily. Therefore, the only way they have is to sell their bonds to credible investors at their level or to other relatives and friends of the stock offering company.