adneom benelux financial markets

ADNEOM TECHNOLOGIES: EXPERTS STRIVING FOR EXCELLENCE www.adneom.comADNEOM BENELUX EXPERTS STRIVING FOR EXCELLENCE WWW.ADNEOM.COM

ADNEOM BENELUX

FINANCIAL MARKETS


Financial Markets 1

Objectives of this training :

- Introduction to Capital Markets

- Introduction to financial products : bonds, stocks, options, futures, foreign exchange

- Give bases to Fixed Income mathematics, statistics for finance, risk.

- Introduction to the main legal side

- Assets & Liabilities management

GOAL : understand how all those notions are working together

Application : understand the financial crisis

For beginner as we don’t have time to go deeper.


Financial Markets 1 : What is a Market?

History :

- First to exchange of goods

- Need of centralization and control (taxes)

Role :

- Stimulating and financing the economy

- Ensuring capital liquidity (primary market, secondary market)

- Measuring economic activity



The Concept of Market

Law of supply and demand

The Exchange is the place where supply meets demand



Market Efficiency

At any given time, prices fully reflect all available information on a particular stock and/or market.

Paradox : if markets were really inefficients, no speculation is possible.

In fact markets are partially efficients.



Types of Markets : Order driven or Price driven

- OTC (Over The Counter)

- Electronic platforms



The participants :



Market Authorities :

- Regulating the Market

- Protecting the Investors

The Exchange :

- Matches and records trades

- Broadcast prices in real-time

The Clearing House :

- Organize the settlements of the operations

- Margins calls



Market members and investors :

- Buy side : investors

- Sell Side : intermediaries



Kind of asset management :-Traditionnal (banks, funds) : passive management-Hedge funds : agressive management-Private banks : taylor made

Difference between securities and derivatives

-Securitites = ownership Derivatives = contract limited in time-Securities = issued by the company Derivatives = issued by anyone-Destruction of value Breakeven game-Cannot loose more than the price Can loose more than the price



How to invest

-Hedging = avoid loosing money by risk covering using futures and options

-Speculation = buying and reselling in assumption of a price trends. Short term

-Arbitrage = taking advantage of market anomalies. Huge amounts for small profits

-Market Making = contract to ensure liquidity on a market.



Market organization



Front Office

Where the trading takes place

- Traders- Sales- Support (Financial analysts, Quants, IT)

Middle Office

Where account allocation and risk management takes place

Back Office

Where administrative procedures takes place (Settlement, accounting, payment, checking, etc.)



Terminology



The Market’s Orderbook

1 orderbook by instrument

- Market depth : all pending orders

- Market by limit

- Best limits



Market rules

Pre opening auctions : before the openning, fixes the opening price (fixing)

Continuous trading : for liquid instruments

Fixings : for less liquid instruments, 2 fixings per day

Closing auctions : at the closing, fixes the closing price (5 to 10 minutes)

Trading after closing : possibility of buying or selling at the closing price after the closing, during 5 or 10 minutes.

Instruments suspension when something happens to the companyInstrument freezing is a security procedure occuring when a value is increasing or decreasing too much. The quotation is freezed during 2 minutes.


Fixing Procedure

Remember :-The Buy Limit (bid) is the maximum price that the trader wants to buy-The Sell Limit (ask) is the minimim price that the trader wants to sell


Continuous Trading

Buy 100 at 125€



Composition of an order

-References : ISIN or Mnémonic of the instrument, quantity, side (sell or buy), clearing and client account

-Type of price : limit order, market order, at any price

-Validity : All or None, Stop order (stop loss, stop limit)

-Type of execution : DAY, GTD, GTC, FOK, FAK

Tactics

Iceberg, Stop Countdown, Market Phase, Linked instrument



List of Electronic market places

Rank Economy Stock Exchange LocationMarket

Capitalization Trade Value

(USD Billions) (USD Billions)

1 United States NYSE EuronextNew York City

15,97 19,813Europe

2 United States NASDAQ OMXNew York City

4,931 13,439Europe

3 Japan Tokyo Stock Exchange Tokyo 3,827 3,7874 United Kingdom London Stock Exchange London 3,613 2,7415 China Shanghai Stock Exchange Shanghai 2,717 4,4966 Hong Kong Hong Kong Stock Exchange Hong Kong 2,711 1,4967 Canada Toronto Stock Exchange Toronto 2,17 1,3688 India Bombay Stock Exchange Mumbai 1,631 258

9India

National Stock Exchange of India Mumbai

1,596 801

10 Brazil BM&F Bovespa São Paulo 1,545 868

11Australia

Australian Securities Exchange Sydney

1,454 1,062

12 Germany Deutsche Börse Frankfurt 1,429 1,62813 China Shenzhen Stock Exchange Shenzen 1,311 3,57214 Switzerland SIX Swiss Exchange Zurich 1,229 78815 Spain BME Spanish Exchanges Madrid 1,171 1,3616 South Korea Korea Exchange Seoul 1,091 1,60717 Russia MICEX Moscow 949 408

18South Africa

JSE LimitedJohannesburg

925 340



MIFID

Markets in Financial Instruments Directive

Opens the financial markets to the concurrence => new electronic platforms like Chi-X, Turquoise, Equiduct

Allow in-house reconciliation

Protect customers

adneom benelux financial markets

Documents