INTRODUCTION
In this work we will analyze the stock market, which is a risk market, but very important, since it is where the purchase and sale transactions of different types of financial instruments that serve to finance companies are carried out.
The financial instruments that we are going to analyze will be: the shares, the common and preferred shares, the bonds, the obligations and we will give greater emphasis to the study of the ADR. In addition to the differences that exist between bonds and obligations and likewise the difference between preferred and common shares.
Likewise, the way in which purchases and sales are made within the stock market will be analyzed.
STOCK EXCHANGE
MEXICAN STOCK EXCHANGE
To begin the work, we will begin by analyzing the importance of the Mexican Stock Exchange and above all what this means for the country.
Stock markets around the world are institutions that companies establish for their own benefit, investors come to them as an option to try to increase their financial savings, providing the resources that they allow, both companies and governments, finance productive and development projects that generate jobs and, above all, wealth.
Stock exchanges are organized markets that contribute to this channeling of financing to be carried out in a free, efficient, competitive, equitable and transparent manner, following certain rules previously agreed by all market participants.
In this sense, the BMV has fostered the development of Mexico, since, together with the institutions of the financial sector, it has contributed to channel savings towards productive investment, the source of growth and employment in the country.
The Bolsa Mexicana de Valores, SA de CV is a private institution, which operates by concession of the Ministry of Finance and Public Credit, in accordance with the Securities Market Law. Its shareholders are exclusively authorized brokerage houses, which each own one share. Approximately 200 of the country's large and medium-sized companies have listed their shares on the BMV.
SHARES, BONDS AND OBLIGATIONS
COMMON ACTION AND PREFERRED ACTION
It is a value title that accredits its owners as owners of the company that issues them and gives them a corporate right. They are securities that represent part of the capital stock of a company that are placed among the investing public through the BMV to obtain financing. Holding the shares gives its buyers the rights of a partner.
The benefits are seen in two ways, which are:
• Dividends, which the company generates (the shares allow the investor to grow in partnership with the company and, therefore, to participate in its profits).
• Capital gains, which is the differential, between the price at which the share was purchased and the price at which the share was sold.
The time of possession of the share depends solely on the holder of the same, since it depends on their expectations and on the market information that is available to know when to sell or buy the shares, many times it depends on the cunning and experience of the investor. You must have full information about how the market is working, in addition to having professional advice, since the purchase of the shares assumes the implicit risk, and to evaluate the factors that could affect the price of a share, both the national and international economic environment (technical analysis) and the company itself
In turn, different types of shares, so we are going to differentiate between common stock and preferred stock.
The common share is one that is held by the "real owner" of the company, it is the last to receive dividends, those who own common shares have the right to vote in the company.
The preferred share, the holder of a preferred share has advantages, since it receives a periodic fixed dividend and has preference are re the holder of a common share, but they do not have the right to vote.
The difference is that the holder of a common share makes the decisions of the company in ordinary assemblies, while the holder of preferred shares does not have a voice or vote, or they only get to vote in extraordinary assemblies and their only function is to receiving dividends.
These instruments are essentially the same throughout the world, for general culture in the United States they are known as preferent and common
The stock market is not only closed to the purchase / sale of shares, but in turn you can find bonds, obligations and other financial instruments that are attractive to diversify the portfolios of investors.
BONDS AND OBLIGATIONS
A bond is a debt title issued by a company or by the State. They specify the amount to be repaid in a certain period known as the maturity date, specify the interest rate to be paid and the total or partial repayments, periodic interest and other obligations of the issuer.
The buyer of a bond gives his money in exchange for this promise to receive interest and the final return of the borrowed amount. The buyer can hold the bond until it expires or sell it to someone else sooner.
The obligations are, credits that represent the individual participation of the holders in a collective credit in charge of a corporation, these instruments are issued by private companies that participate in the stock market.
Although they seem the same, they are not, the difference between a bond and an obligation is that, the bond is issued only by the federal government, and the obligation is issued by a private company, the bond can be acquired by any type of public, and the obligation is made in the financial system.
The nominal value of the bond or obligation may be variable, the term may vary between three and eight years or perhaps more, its amortization may be at the end of the term or in advance installments. The yield is granted a surcharge having as reference the CETES or TIIE. And the guarantee can be unsecured, fiduciary, guaranteed, mortgage or pledge.
ADR
In Mexico they are: Receipts issued by an authorized bank, which cover the deposit of shares of Mexican issuers, empowered by the CNBV to list on foreign markets.
But I will give its definition since it is a very important instrument and that only few have access to it.
An ADR is an American Depositary Receipt (ADR, for its acronym in English) is a US dollar in the form of equity ownership in a non-North American company. It represents the foreign portions of the company subject to deposit by a custodian bank in the country of the company's home and carries the corporate and economic rights of the foreign portions, subject to the conditions specified in the ADR certificate.
An American Depositary Receipt ("ADR") is a physical certificate evidencing ownership in one or more ADSs. The often used conditions is that an ADR can be exchanged for an ADS.
An ADR is a safe and easy way to invest in a non-North American company, as it eliminates complex border transaction paperwork, and offers the same benefits for foreign and domestic investors, so you can take it with you. after the transaction, a depositary bank is needed, such is the case of JP Morgan since it is who issues them.
ADRs can be listed on any of the European and American financial markets, such as the New York Stock Exchange (NYSE) and the American Stock Exchange (AMEX), and Nasdaq, in addition to the over-the-counter market (over the commenter) of the NASD, or the pink leaves. They can also be placed privately and can be traded as a security rule like Rule 144a. Finally, the ADR concept has spread to other geographic markets, producing structures known as global depositary receipts (GDRs), international depositary receipts (IDRs), and European depositary receipts (EDRs), which are generally trade or list in one or the most international markets.
However, no one is exempt from the risk, the risk of money, is present in this instrument, since although the deal is made in dollars and the payment of dividends is offered in dollars, the risk is always present, it should be said that the The risk lies in the fact that the investment is often made in non-North American companies, so before investing in foreign companies to the North American ones, the characteristics of the country in which it will be invested must be analyzed.
Investors around the world are calling for deregulation of the financial system to make transactions easier and to avoid paying taxes.
JPMorgan created the first ADRs in 1927 to allow American investors to invest in the British retailer Selfridge which is why JPMorgan has since demonstrated a leading role in the ADR business. ADR has evolved and has gained sophistication and importance. Today ADR is an instrument widely used by non-American companies to offer and demand their portions conveniently and effectively in the American equity markets.
To better understand, we will see how the instrument placement operation is performed:
Purchase and cancellation mechanisms
A broker can buy ADRs in the United States or buy subordinate in the Home Market or buy through a depositary bank. As the interest of the ADR is constantly changing the broker decides whether to buy the existing ADR or have new purchases, depending on factors such as availability, price and market conditions in the United States and the home market.
Subordinate creation of a New ADR must be in the custody of a depository bank in the originating Market that you wish to purchase. The depositary then purchases the ADR represented by those forms. The process to cancel an ADR is similar to the purchase process, but vice versa. The following chart describes in more detail including the necessary parts and steps.
The purchase of the ADR and the issuance process, in three parts:
Global Direct Investment
(A1) The investor registers and orders the investment sites through the Global Direct Investment program.
(A2) JPMorgan purchases the ADRs in the requested Market.
(A3) Settlement of ADRs and credit on account of the investor.
Existing ADRs
(B1) Investor places in order with the broker in the United States.
(B2) The broker in the United States buys the ADRs in the requested market.
(B3) Establishment and delivery of ADR (In book-entry or in certificate form).
New ADRs
(C1) The investor registers and orders the investment places with the broker in the United States
(C2) The broker in the United States orders placement with the local market broker (outside of the US) in equivalent ways.
(C3) The local broker buys the forms in the local market
(C4) Local forms are deposited with JPMorgan.
(C5) JPMorgan receives the confirmation of the deposit form.
(C6) JPMorgan issues new ADRs and delivers them to the broker in US
(C7) Establishment and delivery of ADR (In book-entry or in certificate form).
Issue Cancellation
1. To request the issuance of a New ADRs, a broker needs his own form or a form from the local market. 1. To cancel ADRs, the broker needs to deposit the ADR with JPMorgan and request cancellation.
2. The forms are deposited with the designated local custodian. 2. JPMorgan instructs the custody to carry out the procedures.
3. The custodian informs JPMorgan, which forms have been deposited in that account. 3. The custodian delivers the forms as instructed.
4. JPMorgan issues the ADR and delivers it through a trusted depositary of the broker's company.
CONCLUSIONS
As we can see in the work, the financial system, through the stock markets, different types of transactions can be carried out, which have the objective of seeking financing for companies and thus grow as such and give the economy a multiplier effect, through generating jobs and economic growth accompanied by development, since as we can see companies are an essential part of the economic system of any country.
Industries as such are the ones that shape countries' development. As far as the financial market is concerned, it is a determining factor. As we could in the stock market, the purchase and sale of different types of financial instruments are made, such as stocks, bonds, bonds, derivatives, futures, etc.
The ADR, as we could analyze it, is an instrument of great importance since it gives a lot of prestige to the company that issues it and for whoever buys it. In addition, we could see the demand that investors make for the deregulation of the financial system, to give greater mobility to capitals towards countries that offer better interests.
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