THE FINANCIAL MARKET: The financial system is the set of intermediaries, markets and instruments that link saving decisions with spending decisions, that is, they transfer income from surplus units to deficit units. It is the set of savings supply and demand forces, as well as the legal, economic, and human, material, and technical channels and instruments through which savings are promoted and an efficient balance between such forces is allowed.
First, it must be understood that the Peruvian financial system is made up of institutions that carry out indirect financial intermediation (Commercial Banking, insurance companies, Financial companies) and direct (Stock Market), the latter operating in two markets that we will see later.
By financial markets we understand the set of interrelation channels between supply and demand of funds, Here we can distinguish attending to the plazop between the money and capital markets, in the first funds are offered and demanded in the short term and in the second to medium and long term.
Money market is the one referred to short-term capital.
The CAPITAL MARKET is the one in which all kinds of investments or transactions related to capital or financial assets are made, whatever their nature, characteristics or conditions. Consequently, short, medium and long-term and even indefinite-term capital bidders and applicants concur. The Capital Market is the market in which the saved sums are concentrated and channeled towards jobs where they remain immobilized for a long period. Said market can be subdivided into credit market and stock market.
The first is a market between credit institutions and investors, in which they use the resources deposited by individuals and companies. It is a direct trading market, closed to the public and with a privileged position of one of the parties.
In the stock market, also called the capital market in the strict sense, the borrowed funds are documented in securities, appealing to public savings, to individuals and companies in general, offering them a return to channel such funds towards productive investments. It is a trading market open to the public, without the borrower being at a disadvantage.
The credit market and the stock market are distinguished by subjects. Thus, in the credit market, consumers can obtain funds, while in the market for valotres, only companies and the state are recipients of funds. On the other hand, in the first of these markets, financial intermediaries obtain a margin or profit by giving on credit what they receive on credit, while in the stock market, there are no margins, but commission.
Regarding the object, in the credit market only debt-capital is contracted, while in the securities market, risk-capital (shares) are also contracted. Lastly, in terms of form, the former is a fundamentally negotiated market while the securities market is a fundamentally organized market, although it is partially negotiated since the placement of the issues can be negotiated, and partly non-negotiated since there is a market over the counter.
The stock market is embedded in the capital market, constituting a specialized segment of it, in the sense that transactions related to certain financial assets called movable securities are centralized in it. Instruments traded on the transferable securities market may be issued with a specified maturity, or not be subject to pre-established terms, as is the case of shares representing capital of public limited companies.
It should be borne in mind that overlaps always occur in the capital market because a certain transaction, as it refers to short-term capital, belongs to the money market, but additionally belongs to the incorporated or represented capital market in securities. The stock market is a specialized market that is part of the capital market, in which operations of a monetary or financial nature expressed in transferable securities, a source of financing for the production of goods and services, are carried out.
The Stock Market is the capital market in which they are instrumented in the form of securities. It is precisely this characteristic that has made these markets flourish. Indeed, the incorporation of the credit right into a negotiable security is what has allowed the accumulation of large capitals and with it the economic development. This growing importance of values is what has made the stock market appear and develop. In the stock market, transactions are carried out whose objective is to channel internal and external savings for investment in productive activities, making them available to those seeking financing, especially - but not exclusively - in the medium or long term, or for an indefinite term. Then certain goods, so-called transferable securities, concur to said market.
PRIMARY ISSUANCE MARKETS: We can define it as the market in which claimants require new financing either through the issuance of debt-equity securities or through venture capital securities. In the first case, foreign capital is used with the obligation on the part of the borrower to repay it within a certain period and to repay it in the meantime with the payment of and a fixed interest. In the second case, what there is is own capital, with no need to speak of amortization, the remuneration being variable and dependent on the issuer's result.
It includes the issuance and placement of transferable securities. Consequently, the volume of the operations carried out in it, allows us to appreciate the flow of financial resources or capital channeled towards productive activities through the stock market or, said d in other terms, the degree of capture of savings through the mechanisms of the aforementioned market. The primary market is an alternative that companies can use to achieve self-financing through the issuance of shares, but it also offers the possibility of obtaining credit through the issuance of bonds and other securities.
First-issue securities are traded on the primary market, which are offered by companies with the aim of obtaining fresh resources, either for the constitution of new companies or to inject new ones into the companies in progress.
The issue is: Each set of negotiable securities from the same issuer and homogeneous with each other because they are part of the same financial operation or respond to a unit of purpose, including the systematic obtaining of financing, as their nature and transmission regime are the same, and for attributing to their holders a substantially similar content of rights and obligations
Notwithstanding the homogeneity of a set of values, it will not be affected by the possible existence of differences between them in relation to their unit amount, dates of circulation, delivery of materials or pricing, placement procedures., including the existence of sections or blocks intended for specific categories of investors, or any other aspects of an accessory nature.
PUBLIC OFFERS OF SALES OF SECURITIES: The public offering, for its own account or for third parties, anyone who indicates the procedure, will be considered a public offer for the sale of securities not admitted to trading in an official secondary market, provided that any of the assumptions.
Public offerings of securities require their prior registration in the Registry, except in the case of securities issued by the BCR and the central government. In public offerings of securities, the intervention of an intermediation agent is mandatory (art. 49).
It is the primary public offering of securities, the offer of new securities made by legal entities (Art. 53)
PLACEMENT : For the placement of issues, any suitable technique may be used at the issuer's choice. The placement procedure must be defined and made public in all its aspects before proceeding to it. The same principles of freedom, prior definition publicidsad will apply to the choice of the group of potential subscribers to which the issue is offered and respecting the deadlines provided by law.
MODIFICATION OF SECURITIES IN CIRCULATION: Any modification of securities already issued that implies alteration of the rights or obligations of their holders, of the conditions of exercise or compliance of one or the other, of the guarantees of the issue or of any other substantial element thereof, will be subject to compliance with the presentation of the general meeting agreement to Conasev.
SECONDARY MARKET: It is where the transfers of securities and securities that have been previously placed in the primary market are carried out, giving liquidity, security, profitability to investors and allowing them to reverse their purchase and sale decisions. It is one where investors exchange previously issued securities. It is therefore a realization market without whose existence the primary market would be difficult since it would be difficult to subscribe to the issuance of financial assets if there were no possibility of liquidating the investment by transmitting them. Therefore, it provides liquidity to investments, but without directly affecting their financing.
However, we cannot consider that secondary markets have a passive role either. On the contrary, there is a certain interrelation between primary and secondary markets. In addition to the liquidity effect, there are other interactions. Thus, the events of the secondary market determine the bases and conditions of the issues through the negotiation of the preferential subscription rights.
The subsequent negotiation of the securities, that is, the exchange of the previously issued and placed securities; in other words, this is the level at which transactions are made for papers already in circulation. Consequently, at the secondary level, transactions are carried out that involve simple transfers of existing financial assets and, therefore, the volume of such operations reflects the degree of liquidity in the stock market.
It follows that the primary and secondary markets are reciprocally complementary and must coexist, that is, without the possibility of being able to transfer the value acquired in the first placement and without consequently being feasible the liquidity that might be required at any given time, counting only on the As an alternative to enjoying an income or waiting for the maturity of the paper, the attractiveness of acquiring securities in first place would diminish dramatically.
PARALLEL MARKETS: As we will see, secondary securities markets can be official or unofficial, in the first case we are dealing with stock markets and in the second case we are dealing with parallel markets.
Although the stock market arises as a need for traders, its further development requires a series of technical or legal mechanisms to surround it with greater legal and economic security. All this officialization involves a series of obstacles and requirements that are tried to avoid with the creation of new markets, generally close to the stock market, but many more accessible. These types of markets, which lack official transparency, are called parallel markets.
These markets can arise even within the Exchange itself, as in fact it occurs in regulated markets. They are therefore fundamentally acclimatization markets in which less rigorous requirements are required for admission than in the official market, after a certain time has elapsed in order to comply with the requirements of access to the first market. These markets also emerge as alternative ways of financing for the small and through companies that are excessively dependent on bank credit, and which usually finance medium and long-term investments with short-term loans, all of which leads to an excessive shortage of means of financing.With the existence of these parallel markets, it becomes more feasible to obtain long-term resources or own capital by issuing securities that could easily be transmitted to these secondary markets.
In the USA, there are over the counter denomination markets, markets without physical location, that operate through an electronic network, in France, the Second Marché, for companies that do not wish to participate in the official market.
THE STOCK MARKET: The Stock Exchange is a first approach to the stock market, with the official, organized and open character. On the one hand, it is more restricted than the stock market, since it does not cover the entire primary market and part of the secondary market remains outside the Stock Market. But on the other hand it is broader since the stock market, extends to bordering areas of the money market, as it happens with the negotiation of bills of exchange and promissory notes. In addition, the credit system in cash operations connects the money market and the stock market.
The market is classified as both over-the-counter and over-the-counter, according to whether the transactions related to the transferable securities are carried out on the exchange and in the venue, or are carried out outside the exchange or at its facilities, but in this case not using the mechanisms of the wheel, but the so-called centralized or organized over-the-counter markets, that is, the trading table and the product table. It is where the purchase and sale of previously issued securities is carried out, the Stock Market being the institution that centralizes said operations.
Elements of the Stock Market are subjective, here are individuals, companies, financial entities and institutional investors (investment companies and funds, insurance companies, AFPs). On the other hand, there are the issuers that are fundamentally large companies and the State, and finally the intermediaries that are the SAP and the Broker Agents. The objective elements are the contracting centers and the securities under negotiation. The formal elements are constituted by the procedures, forms and rules of relationship between the previous elements.
EXTRABURSATIL MARKET: Registers the purchase-sale operations that are carried out outside the regulated circles in the stock market. The negotiating table is located in this market, the purpose of which is to give part of it the advantages of an organized market such as the stock market.
STOCK EXCHANGE: The Stock Exchange is the most important service institution in the stock market, not only because it is a non-profit civil association, but also because a large number of securities are traded in it, through stockbrokers. who after receiving the purchase and sale orders from their clients or clients, carry out the corresponding transactions in the daily sessions of the stock market, trading table and product table
STOCK WHEEL: This is the name of the daily meeting for the negotiation of securities previously registered in the stock market records; These securities are mainly made up of capital or common shares, labor shares, as well as certificates of preferential subscription and bonds.
NEGOTIATION TABLE: Facilitates the transaction of securities not enrolled in a stock market and gives natural and legal persons the possibility of investing their savings in securities that yield benefits higher than the traditional market, be it dollars, banks, etc., which serves as a complementary mechanism to financing where companies negotiate their short-term heats, especially in situations of low liquidity. Here, the main thing is the trading of short-term instruments (promissory notes, bills of exchange, treasury bonds, etc.) issued by companies and financial institutions.
PRODUCT TABLE: Over-the-counter operation implemented by the Lima Stock Exchange in order to allow brokerage agents to negotiate with securities, representative of products that are traded in the country, coffee, sugar, potatoes, silver, etc. Comodities.
ORGANIZATION OF THE STOCK MARKET IN THE STOCK MARKET LAW
D. Leg. 861 10.22.96
Transferable Securities: Transferable securities are those issued in bulk and freely negotiable that grant their holders credit rights, nominal or patrimonial, or those of participation in the capital, patrimony, or profits of the issuer (Art 3)
Public Offer: Of transferable securities is the adequately disseminated invitation that one or more natural or legal persons address to the general public or to certain segments of it, to carry out any legal act related to the placement, acquisition or disposal of transferable securities (Art. 4)
Private Offer: The one not included in the previous article, that does not use mass media, aimed at institutional investors, offers whose nominal value does not drop below 250,000 soles
Intermediation: Of transferable securities, the habitual operation of buying and selling for others, placement, distribution or brokerage; or the acquisition for own account in order to be placed later, with price differential.
Public Registry of the Securities Market: Securities, issuance programs, mutual funds, investment funds are registered, in order to provide necessary information, the registry is kept by Conasev, the information is freely available.
Registration of securities: Those of public offering, optionally those that are not carried out in a public offering, the registration of securities does not imply attesting to their goodness.
Obligation to report important facts: These are the facts that may influence the decision of a sensible investor.
Reserved Information: When this can cause damage to the issuer
Exclusion from registration: At the expense of Conasev
Privileged Information and Reservation Duty: (Art 40) Any information from an issuer referring to it, its businesses or one or more securities issued or guaranteed by them, not disclosed to the market and whose public knowledge, by its nature, is capable to influence the liquidity, price, or price of the securities issued. That information that is available on the acquisition or sale operations to be carried out by an institutional investor in the stock market, as well as that referring to the public offerings. The reserve exceptions, these operate with regard to the directors of Conasev and of clearing and settlement institutions, brokers, and members of the boards of directors of the stock exchanges.
Public Offers (Arts 49 to 52): They require the registration of the securities in the registry, except for securities issued by the BCR and the central government. In public offers, the intervention of an intermediation agent is mandatory (issuers may do so directly and in the primary placement of investment funds and mutual funds).
Primary Public Offer (Arts. 53 to 63): The primary public offer is the offer of new securities made by legal entities, registration requirements, information leaflet, nine-month term.
Secondary public offering (Art. 64): Its purpose is the transfer of previously issued and placed securities. The public offering of purchase, public offering of sale and public offering of exchange constitute a secondary public offering.
Public Offer for Sale (Arts. 65 to 67): That made by one or more natural or legal persons in order to transfer previously issued and acquired securities to the general public or to certain segments of it. Requirements, information leaflet to Conasev, registration of securities in the registry.
Public Offer for Acquisition and Purchase (Art. 68): The natural or legal person who intends to acquire, directly or indirectly, in a single act or successive acts, a quantity of shares with the right to vote registered in a stock market wheel, or convertible bonds, Subscription rights or other securities, which may entitle to the subscription or acquisition of such shares in order to achieve a significant participation in said company, must make a takeover bid addressed to the holders of said company.
Public Offer of Purchase by exclusion (Art. 69): The exclusion of a value from the registry determines the joint obligation of those who are responsible for it, to make a public offer of purchase addressed to the other holders of the value.
The above offers are irrevocable.
Whoever acquires by public offer and does not comply with the indicated requirements (Art 72) is suspended in the exercise of his right and forced to sell by public offer in two months.
Voluntary Public Offering: This system can be used for any value, and in the cases contemplated in art. 68 whenever they are registered in the registry.
Public Exchange Offer (Art. 75): This refers to the sale or acquisition of securities when the consideration is offered to pay in full in securities; The proposed exchange of securities must be clear as to their nature, valuation, characteristics offered in the exchange, as well as the proportions in which they must take place.
International Offers: General provisions of Conasev.
Transferable Securities: They can be represented by book entries or in titles
Execution of Representative Securities: debt securities constitute execution titles without their protest being required, this norm does not apply to bills and promissory notes.
Registered Shares (Art.83): The shares registered in the register must be in a stock market wheel.
Portfolio Shares: The total shares of the issue itself held in the portfolio may not exceed ten percent.
Bonds: The public offer of debt securities with a term greater than one year can only be made through bonds, subject to the provisions of this law and the provisions on the issuance of obligations contained in the Companies Law. Bonds can be issued according to these provisions even by private legal entities other than corporations.
All bond issues require the representative of bondholders.
Short-Term Instruments: Short-term instruments are debt securities issued for terms not exceeding one year and can be issued through titles and account entries.
The notes, bills of exchange or other representative securities represented by Conasev may be used as short-term instruments.
Centralized Trading Mechanisms: Centralized mechanisms are those that bring together or interconnect several buyers and sellers simultaneously in order to trade securities.
The securities traded in centralized mechanisms are irrevocable.
Stock Market Wheel: It is the centralized mechanism in which the companies carry out transactions with securities registered in the registry and the respective stock market wheel. It is led by a stock exchange official, named wheel director, who is responsible for resolving controversial issues that arise without question.
This is forbidden from acquiring or transferring onerous securities registered in a stock exchange.
The securities registered in the stock market may be traded outside of said mechanism. In these cases, the bankruptcy of an agent company is required, who must certify the transaction and timely settlement thereof, indicating the amount, price and date, this information must be delivered to Conasev.
Other Centralized Trading Mechanisms: Other centralized trading mechanisms are considered to be those whose purpose is to trade securities not registered on the stock market, where intermediation agents must intervene.
Stock Exchange: Stock exchanges are civil associations of public service made up of agent companies whose purpose is to facilitate trading
Stock Market Functions:
- Register and register securities for trading on the
stock market as well as exclude them.
- Promote the transaction of securities.
- Propose to Conasev the introduction of new products and provide services.
- Provide infrastructure.
- Offer truthful and accurate information
- Resolve conflicts in the first instance.
- Promote conciliation.
- Equity S /. 4'000,000.00
The Stock Exchange has associates whose participation certificates can be transferred at the stock market, have no par value, and a guarantee of the participation certificate is given in addition to extraordinary fees.
Guarantee Funds: All exchanges must maintain a guarantee fund to support the operations of the agents.
Intermediation Agents: Intermediation agents are corporations that, as intermediary companies, are dedicated to intermediation in the stock market, require authorization, are required to exercise diligence and loyalty, relationship with the principals and are governed by the commercial commission.; that is to say that all the intermediation activities are the result of commissions and orders of its clients by means of written orders.
Stockbroker Companies: These are companies dedicated precisely to the brokerage of transferable securities, due to their special nature, they require a share capital of S /. 750,000.00.
Their purpose is to buy and sell securities on behalf of third parties and for their own account in centralized centers and mechanisms and are empowered to:
- Place securities on the national or international market.
- Place securities in the country issued abroad.
- Initially subscribe the primary issues
- Act as representative of the bondholders
- Manage mutual and investment funds
- Custody of securities
- Grant momentary credits
- Act as fiduciaries in securitization
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