March 2011
Beginner
192 pages
4h 30m
English
Chapter 1
Fundamental Concepts
Figure 1.1 encapsulates the typical flow of the global securities market and serves as a framework for review. Although this chapter is elementary in approach, the educated professional should enjoy the chapter because it provides rich context and a solid foundation for the material that follows.
At the bottom of the chart (the Earth if you will) are the issuers of securities—corporations, sovereigns, and all of the many legal entities that comprise the debt and equity market worldwide.
The investor is at the bottom-left-hand corner of the great pentagram in the chart. The investor decides to buy a security using a broker. The broker needs to locate a security so the broker seeks out a place where there is a market—an exchange. The exchange provides liquidity—an active, readily available market in those securities. The exchange members are linked to a clearing system whereby the seller of the security (via a broker) ratifies an order with the buyer (via the buyer's broker). The clearing system is linked to a central securities depository through which the two market participants deliver securities and settle payment. At the central custodian, the investor's securities are held in safekeeping through the intermediation of a broker or bank. And as neatly and as quickly as one could draw a star, the securities pentagram is made manifest.
Overlooking the securities universe, like the sun, are the regulators. Like the moon driving the inexorable tides, ...
