Mutual actions of participants in a specific form of purchase and sale of material assets, called “bidding,” are called the term “exchange transactions”. The types of such coordinated activities fall into four broad types. They, in turn, enter into transactions, the subject of which are various kinds of goods and assets owned by numerous funds. Types of exchange transactions and their characteristics are presented in our article.
General theoretical information
Exchange transactions, the concept and types of which are directly in the field of active actions of their participants, are aimed at acquiring (or alienating) the rights and obligations associated with goods purchased under a specific type of contract of sale. In the course of such transactions, objects having access to valuation and exhibition at tenders are transferred.
As a rule, the processes of the so-called stock market game are characterized by analysts from several sides. They are examined in terms of compliance with legal, economic, and simply organizational and ethical standards.
These are exchange transactions, the types of which can be the following list:
- offer of products, accompanied by the presentation of their quality samples;
- conclusion of contracts for the supply of goods;
- agreements involving the transfer of tangible assets into property subject to non-urgent payment;
- reaching agreements, as a result of which there arises the right (but not the obligation) to purchase certain securities or specific goods during the agreed period.
Bidding procedure
The right to establish specific procedures for the implementation of the exchange trading procedure is held by each individual organization that accepts sellers and buyers operating in a special legal field. Common for each institution, referred to as the exchange, is the requirement of a written agreement between bidders.
In the current model of the document evidencing the fact of the transaction, the following should be spelled out:
- a specific time period within which the subject of the trade must arrive at the recipient;
- number of units of goods;
- indicators by which it is possible to judge the compliance of acquired material goods with their quality standards;
- Gender of the subject of the transaction;
- terms and form of payment under the contract;
- delivery nuances and the degree of responsibility of the parties.
Within the framework of the fixed-term contract, only the last two items from the above list are negotiated. The price is usually called conditional. Such arrangements are called futures.
Contracts giving the right to purchase goods and not stipulating obligations are sold as a special kind of securities called options. A bidder acquiring such a document together with him becomes the holder of the right to purchase a specific product within the agreed period. At the same time, these papers can be used both for their intended purpose and sold, passing along with this the opportunity to purchase the object indicated in them.
Cash Transactions
One of the varieties of exchange agreements is the so-called immediate execution transactions. Within their framework, the transfer of securities and settlement takes place on the day the agreement is signed. Another type of exchange transactions are futures contracts, the content of which is the sale of foreign currency of another state.
Immediate transactions are referred to as cash transactions and may constitute simple contracts and agreements with estimated profits. Moreover, based on world practice, payment for the transferred securities should be made immediately or no later than the fifth working day after signing the relevant documents. If the acquired package includes more than 100 shares, the calculation can be made within two weeks.
The Russian stock market sets slightly different payment dates for immediate transactions. Funds must be transferred no later than two days. In the framework of ordinary transactions, settlement may take three months.
Derivatives transactions
Such agreements imply the announcement of specific payment dates and the dates of their signing, as well as a transparent form for establishing value. The types of these contracts have a clear division based on the following characteristics:
- the calendar period in which fees may be paid (the number of days agreed in advance and documented);
- the date of the decision on the value (it may be the day the transaction is concluded or any other number);
- the nuances of concluding a contract, which primarily depend on its type (with a demonstration of the subject of the agreement, individual, optional, etc.).
In general, such transactions are divided into two types:
- shelving (when a party to such an agreement, upon the expiration of the agreed period, has the legal right to act both as a seller and vice versa);
- report (mutual agreement on the transfer of securities, in which the receiving party agrees to subsequently redeem them at a higher rate).
There are also exchange transactions, the types of which upon their conclusion involve a procedure during which one of the parties to the contract receives the right to demand delivery of securities from the other, the number of which can be multiplied by a certain ratio. The cost of each, however, remains fixed and equal to the one that was marked at the time of the conclusion of the agreement.
Follow-up deal, option and speculation
The conclusion of contracts of the “report” type is included in the main types of exchange transactions and is one of the types of agreements with deferred settlement, which is associated with a lack of stability in the foreign exchange market. In addition to those indicated, these include transactions in which securities are transferred for remuneration to a pre-selected intermediary. Intermediate ownership lasts for a specified period and is paid at a price lower than that set for the subsequent repurchase.
Transactions, at the conclusion of which the right to acquire goods arises, involves the payment of a fee after the agreed period, which cannot be lower than one working week and above two months. In the event that the settlement date coincides with the calendar weekend, the obligation to pay the due amount is automatically extended until the next weekday.
It is worth noting that the types and characteristics of exchange transactions cannot be fully described without mentioning speculation carried out within the framework of trading. At the same time, despite the negative connotation of this term, such operations are called useful by many experts. This is primarily due to the fact that speculative transactions in some way prevent price imbalances and even balance them.
Trading Rules
Exchange transactions are concluded in writing by prior arrangement. In addition, there is an offer expressed through a detailed statement of the conditions in letters, messages on the Internet, telephone conversations, etc.
Those participants in the stock exchange game, which can be ranked as professionals, usually enter into transactions only in their own name and at their own expense. According to the rules of the institution, they are obligated to voice prices in advance and not to deviate from them at all times during the auction.
Such transactions are by all means registered, which happens only if there is a document duly executed. On this document, the relevant authority makes a note and assigns it a personal serial number. Having received a security, its new owner is obliged to notify the person issuing it.
Subjects and objects of contracts on the exchange
Since games on the stock market are carried out according to strictly established rules that form a clear structure and mechanisms of the ongoing processes, the list of participants is subject to strict regulation. These include:
- entities acting within the framework of the exchange game exclusively on their own behalf (traders);
- legal entities or individuals having the legal status of founders of tenders;
- brokers acting on behalf of and on behalf of clients.
All of the above participants, in carrying out their actions, consider as subjects of transactions:
- various kinds of goods;
- raw materials;
- stocks;
- financial documents (derivatives) derived from the main product or service;
- National currency.
The persons organizing the game on the exchange provide direct legal assistance to individual traders, as well as provide general consultation for each and every bidder, if the types of exchange transactions and the procedure for their execution determine such a need.
Goods and basic bidding procedures
Speaking in more detail about which financial products are put up for sale as part of the stock exchange game, the following are distinguished:
- industrial products;
- consumables intended for processing;
- agricultural products.
The price of the listed items of trade is formed during the operation of the exchange mechanisms. As a rule, these are based on free structuring of prices, which, however, is directly dependent on the rules established by the institution conducting the auction, especially in charge of the types of exchange transactions with real goods.
The main list of financial transactions carried out as part of such events includes:
- purchase and sale;
- the procedure for listing securities admitted to trading;
- monitoring the compliance of securities with the requirements established by the exchange (as well as the processes of the exchange game - with the prescribed conditions);
- registration of the reached agreements;
- setting prices for the base and quoted currencies;
- implementation of collateral procedures;
- legal support of settlements;
- cash and non-cash payment of bills;
- conducting statistics in order to study the financial market and provide relevant information;
- cash safety services;
- issue of securities.
Pricing
Within the framework of the stock exchange game, the value of assets in general and securities in particular is determined depending on several conditions:
- the results of the agreements of free traders (traders);
- in accordance with relevant market patterns (taking into account modern macroeconomics);
- based on the basic principles of auction trading.
At the same time, the prices established during the negotiations, one way or another, rely on the nature of the current market, which is often the main source of information that is accessed, making a choice in the direction of one or another final decision.
The agreements reached by the parties in the framework of competition by type of auction also belong to the category of “exchange transactions”. The types of such contracts have a number of characteristic features and are of great interest, being a special financial institution.
Auction Features
Public trading held within the framework of the stock exchange game is quite clearly divided into two main types - ordinary (classic) or double. The first includes those in the course of which, due to the relatively small demand for the goods offered, it is sellers who are in fierce competition among themselves. The second type involves the active interaction and rivalry of the acquirers in the same way as the types and goals of exchange deals.
The classic type of auction is the British version of the auction, a characteristic feature of which is the increase in price in the process - from the minimum to the one at which the goods will eventually be sold.
Applications for bidding in the status of sellers are submitted in advance, which is necessary for studying, the initial exchange assessment of the products offered and the formation of a list of quoted goods. Established in advance and the magnitude of the step by which will increase their value in the process of auction games.