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Securities Industry © MicroAgility, Inc. and/or its Affiliates. All Rights Reserved, but you may distribute this publication in its original form only. The information contained herein has been obtained from sources believed to be reliable. MicroAgility disclaims all warranties as to the accuracy, completeness or adequacy of such information. MicroAgility shall have no liability for errors, omissions or inadequacies in the information © MicroAgility, Inc. All rights reserved. Page 1 of 40 Letter from the President You + Me = MicroAgility Welcome to the Team, Agilian! This document has been compiled for the benefits of our employees and affiliates. In this document, you will find in-depth information about the fundaments of the Securities Industry. I hope that you find this information useful and enlightening. As always, if you have any comments regarding this information, please do not hesitate to contact me at [email protected]. I wish you all the best. Sincerely Sajid Khan President-Your Business Partner © MicroAgility, Inc. All rights reserved. Page 2 of 40 Table of Contents LETTER FROM THE PRESIDENT ................................................................................... 2 THE MARKETPLACE .................................................................................................... 5 1. What are Securities? ........................................................................................................................ 5 2. How do Financial Markets Work? ..................................................................................................... 6 3. Who are the Participants? ................................................................................................................ 6 3.1. Business Organization ......................................................................................................................... 6 3.2. Types of Customers ............................................................................................................................. 7 3.3. Different Categories ............................................................................................................................. 7 4. Trade Processing Summary ........................................................................................................... 10 5. Who Enforces the Rules and Procedures in the Securities Industry? .............................................. 11 5.1. Federal Reserve System .................................................................................................................... 11 5.2. Securities Exchange Commission .................................................................................................... 11 5.3. Office of the Comptroller of the Currency ........................................................................................ 12 5.4. Self-Regulating Organization (SRO) ................................................................................................. 12 MAKING THE DEAL .................................................................................................... 14 1. Creating New Securities ................................................................................................................. 14 2. Buying and Selling of Securities ..................................................................................................... 15 2.1. Financial Markets ............................................................................................................................... 15 2.2. Securities Exchange Markets ............................................................................................................ 16 2.3. Securities Over-the-Counter Market ................................................................................................. 17 2.4. Other Markets ..................................................................................................................................... 17 2.5. Orders .................................................................................................................................................. 18 2.6. People in the Trade Process ............................................................................................................. 18 SECURITIES PROCESSING ......................................................................................... 19 1. Processing Functions in Buying and Selling of Securities .............................................................. 19 1.1. Post-Trade Processing ...................................................................................................................... 19 1.2. Broker Processing .............................................................................................................................. 19 1.3. Bank Processing ................................................................................................................................ 20 © MicroAgility, Inc. All rights reserved. Page 3 of 40 1.4. Investment Manager Processing ...................................................................................................... 21 1.5. Mutual Fund Processing ................................................................................................................... 21 TYPES OF SECURITIES INSTRUMENTS ..................................................................... 22 1. Equity – Related Instruments ......................................................................................................... 22 1.1. Common Stock ................................................................................................................................... 22 1.2. Preferred Stock ................................................................................................................................... 22 1.3. Convertible Bonds .............................................................................................................................. 22 1.4. Equity Derivatives ............................................................................................................................... 23 1.5. Equity Indexes .................................................................................................................................... 23 1.6. Equity Options .................................................................................................................................... 23 2. Fixed Income Instruments .............................................................................................................. 23 2.1. Introduction ........................................................................................................................................ 23 2.2. Classifications of Bonds .................................................................................................................... 23 2.3. Characteristics ................................................................................................................................... 24 3. Mutual Fund Instruments ............................................................................................................... 25 3.1. Classifications .................................................................................................................................... 25 3.2. Types ................................................................................................................................................... 26 3.3. Characteristics ................................................................................................................................... 27 4. Other Products ............................................................................................................................... 27 4.1. Forwards Contract ............................................................................................................................. 27 4.2. Futures Contract ................................................................................................................................ 28 4.3. SWAPS ................................................................................................................................................ 28 4.4. American Depository Receipt ............................................................................................................ 28 GLOSSARY OF INDICES ............................................................................................. 29 FINANCE & INVESTMENT TERMINOLOGY .................................................................. 31 © MicroAgility, Inc. All rights reserved. Page 4 of 40 THE MARKETPLACE 1. What are Securities? Securities represent the entire range of investment opportunities. A security can refer to an instrument that allows the holder to claim an ownership position in a corporation (a stock) or other rights to ownership as set in a specific contract. A security can also refer to an instrument that allows the holder to have a creditor relationship with a corporation, a government, or its agency (a bond). Moreover, these securities are intended to generate funds for the issuer and give rights and returns to the investor. Figure 1Types of Securities © MicroAgility, Inc. All rights reserved. Page 5 of 40 2. How do Financial Markets Work? Figure 2 Regulatory Environment Banks, brokers, investment managers, and mutual funds in the securities industry function
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