Types of exchange transactions. About forward, futures and options exchange transactions A real exchange transaction is associated with mutual
The algorithm for processing and passing each transaction on the exchange is always clearly specified. Therefore, it is important for participants to remember what types of agreements are there, and in what sequence the market agreement passes from the stage of discussion of the main conditions to the final stage in the form of obtaining benefits.
What is an exchange transaction
Exchange transactions are pre-agreed actions of bidders that are aimed at establishing, changing or finalizing the rights and obligations of both parties regarding goods. Now there are legal, financial, organizational and ethical aspects of such agreements.
And the main tools can act as an object:
- securities;
- contracts;
- currency;
- stock assets;
- products.
Any actions performed on the exchange are protected by a number of actions. But all transactions are checked by the broker, with the support of which trading is carried out, are controlled by the settlement and clearing system and are drawn up using related documents (in writing or in electronic form).
Reports on concluded transactions are provided every day. It is also worth considering that the algorithm for concluding any exchange transactions: types dictate the rules of the resource where they are formed.
Types of transactions on the stock exchange and their features
The agreement itself must be official registration, and its content certainly includes a mention of the object, the amount of obligations, the cost and the deadline for registration.
The conclusion of a contract between two citizens on the basis of the rules recommended by the market itself (foreign exchange, commodity, stock, etc.) is the same meaning that all types of exchange transactions have.
Cash spot transactions
Spot operation- a separate type of operation where payment occurs in the minimum time. The mentioned period includes the fastest option - transfer of money by payment through a bank, which lasts a maximum of 1-2 days.
This transaction is concluded when either party can immediately make a payment, and the second can fulfill the agreed goods within a short time frame. Many types of cash agreements are made automatically, which allows you to respond to a decline in the situation with securities.
Short trades
Agreement without coverage- the sale of shares that in fact do not belong to you and do not exist, but they can be sold by borrowing. A financial transaction is considered a speculative contract.
The broker lends and, by selling the security, hopes that it will fall in value, and then it will be possible to buy it back much cheaper. After the return, all profits remain with the player. And the broker himself takes a commission on the sale and repurchase.
But we must remember that such an operation is carried out with great risk: the operation can end not only in profit, but also in loss.
Transactions on credit
Credit agreements are also called (from 1:1 to 1:1000). Brokers also give credit here and again take a percentage. Such an exchange transaction is loved in the Forex market. It is worth taking such an analogue of a loan carefully: taking more than you have in your account, there is a great risk of losing everything easily.
Any price movement against the position and the loss will be a significant part of the stock trader's funds. In order not to lose the borrowed money, take all the funds and leave on the balance sheet the amount that was before the start of work, minus losses and commission.
Arbitration
Arbitrage scheme of transactions - single trader contract with a single market instrument, at the same time, but on different trading floors. Securities are often circulated on different exchanges: buying on one cheaper, you can then resell it on another more expensive.
The final difference in cost, although small, but due to the number and volume of transactions, there is an opportunity to earn.
Urgent deals
Fixed-term contracts are agreements that are distinguished by a clear deadline for the delivery of goods, the calculation and establishment of tariffs. They are characterized by the presence of a significant period of time between registration and fulfillment of conditions.
The longer the period between the start date and the end date, the more risk participants are exposed to. Such agreements are divided into: solid, conditional and prolongation. Operations for a period (without a true product) often contain .
Deals with a fixed price or firm
In such contracts of sale, the main role is played by price and term. Therefore, counterparties do not have the authority to change the terms, no matter how the cost of a commodity or security changes.
The buyer expects that by the time of calculation the tariff for the object will be higher than he agreed to pay, and the seller hopes for the opposite situation.
It is customary to call firm transactions where obligations are not subject to change: they must be performed in a clearly defined period and at a fixed price, since they are standardized in form. Therefore, they are acceptable when there is information about the movement of money.
Futures
- another version of a firm agreement, where not the product itself is purchased, but its price at the time of the conclusion. The cost is fixed by mutual agreement between the seller and the buyer: it may be higher or lower than the rate of the asset (stocks or bonds) on the exchange now.
In fact, this is a contract associated with the mutual transfer of rights and obligations in relation to typical contracts for the supply of an exchange commodity. Such paper implies the alienation (assignment) of the ability to sell or buy any product.
Floating value transactions
Speculative transactions are those types of transactions that are performed on the basis of an increase or decrease in the price of an asset in order to expect benefits in the future. This transaction is opposed and sometimes called a deport (when the price is lowered in the future) or a report (if the benefit from the increase in the tariff and profit from the difference is implied).
Operation on the stock exchange does not take into account other risk reduction goals. Such transactions may sometimes not even take place: then the participants refuse to perform the operation and receive a bonus for refusal.
Optional
Option Agreements- These are contracts related to the assignment of rights to the future transfer of obligations in relation to an exchange commodity or a contract for its supply in order to secure financial transactions.
According to the implementation technique, there are several types: put option(put) or purchase (call), double or shelving (double), as well as complex and multiple.
More often, a purchase transaction allows the buyer to purchase any package of securities at the appropriate value during the term of the contract. And the seller is obliged to sell this package if the holder so requests.
Prolongation
A rollover contract is an operation to extend an urgent transaction. In situations where the term of the contract is already gradually expiring, and at the time of fixing the price level, if the requirements do not satisfy the buyer, he has the right to request an extension (prolongation) of the agreement.
Such a transaction is called a report, and when the seller is primarily interested in extending the transaction, the transaction is called deportation.
The mechanism for concluding transactions on the stock exchange
Now brokers provide special terminal, where you can create a request for a transaction. Such an operation is called an order, which is mandatory for execution by a broker and is divided into several types:
- market;
- limited;
- stop order;
- at the rate.
Exchange transactions are controlled only by professional participants, who are distinguished by a clear specialization in various variations of activities.
The standard contracting process includes:
1. Introduction of statements into the scheme of trade. The algorithm for buying and selling securities is confirmed either by participants through a broker's note, or by brokers on the basis of signing related securities. In the body of a classic application for an operation, it is imperative to indicate the exact name and properties of the goods, the type, number of important securities, price, period and type of contract.
2. Conclusion of a contract. Now there are several models of work in the stock transaction: "seller - intermediary - client", "owner - intermediary - second intermediary - buyer", "owner - two flank intermediaries - client - central intermediary". Contracts are made between bidders on the exchange orally or in the form of an exchange of simple notes. Also, the fact of concluding a contract can be recorded in the central computer if electronic technologies are used.
3. Reconciliation of the parameters of the concluded agreement. All related discrepancies in the agreement are excluded here. Both parties should study the terms of the transaction and discuss any conflict situations that have arisen. At the same time, at this stage, the parties exchange documents with the full parameters of the requirements. If there are no discrepancies in the papers, then the procedure is considered successful.
4. Clearing (mutual settlements). It includes a set of procedures that include the procedure for analyzing the final forms for their authenticity and formalization standards, calculating finances for transfer and preparing settlement forms. There are many effective methods for accounting for the amounts and numbers of securities that are payable and deliverable: the most reliable methods are bilateral and multilateral.
5. Deal execution. The final step involves the reciprocal fulfillment of obligations: the delivery of special securities to the buyer and the transfer of the promised money to the seller (everything is done through a system approved by the parties to the contract). Simultaneous completion will protect participants from unnecessary risks.
Planning transactions on the stock exchange- a rather complicated procedure, not only in theory and practice, but also from the technical side. Due to the fact that now most contracts are conducted online, this creates a lot of additional difficulties after the introduction of automation.
Futures contracts (futures transactions or simply futures), whose name comes from the English word for the future, are some type of transactions taking place on the commodity or stock exchanges, contracts with strict standards of urgent order, where there are two participants. The obligations of one of the participants in such a process include the sale of a fixed amount of previously designated goods, securities, possibly currency. The second participant is obliged to pay for such a purchase. will be subject to implementation only after a certain time period.
Futures deal: features
The main distinguishing feature of futures contracts lies in their strict standardization. They are traded only on narrowly specialized exchanges. Prices specified in the terms of futures contracts are called futures prices. Due to the presence of the exchange, the seller of a futures-type contract retains the full opportunity to buy the contract at any time convenient for him. The liquidity of these contracts is very different from forward transactions. The presence of strict standardization means that trading is allowed only in such contracts, the terms of which are clearly defined:
- transaction sizes;
- trade units;
- delivery date;
- minimum price movements according to the terms of the contract.
Department of Management Essay on the topic: Futures operations of commodity exchanges in Russia
Students gr.VN3-1 Turatbekova D.K. Scientific adviser Mineeva I.A.
Moscow, 1997
PLAN
Introduction -3-
1. The history of the emergence of world and Russian futures exchanges -4-
2. Organization of futures trading -6-
3. Futures contract -8-
4. Main features of futures trading and factors influencing its development -10-
5. Hedging futures transactions -12-
6. Impact of futures exchanges on pricing -14-
7. Futures market in modern Russia. Problems and development prospects -16-
Conclusion -21-
References -22-
INTRODUCTION.
For two decades now, in Western countries, the derivatives market, and in particular the futures market, has been acting as a full-fledged element of the financial market. In Russia, this area of activity is still relatively young and is only at the development stage, while in industrialized countries, futures transactions have long been a financial instrument widely used to hedge against market risk and do not exclude the possibility of making a profit.
In accordance with the law of the Russian Federation of 20.02.92. "On commodity exchanges and exchange trading" futures are transactions related to the mutual transfer of rights and obligations in relation to standard contracts for the supply of exchange goods (1). At the same time, such transactions, unlike transactions for real goods, do not provide for the obligation of the parties to deliver or accept real goods (within the period stipulated by the contract), but involve the purchase and sale of rights to goods (paper transactions) (8, p.5).
Today, futures exchanges dominate and operate in almost all Western countries. They allow you to sell goods faster, reduce the risk of losses from adverse price changes, accelerate the return of advanced capital in cash in an amount as close as possible to the originally advanced capital, plus the corresponding profit. (3, PAGE 28)
In addition, futures trading allows you to accelerate the return of advanced capital in cash in an amount that is as close as possible to the originally advanced capital plus the corresponding profit. In this case, there is a kind of division of functions between the bank and the exchange: the bank lends only that part of the commodity value, which, in its opinion, will be reimbursed regardless of market fluctuations, and the futures exchange covers the difference between the bank loan and the selling price of the goods. Futures trading provides savings in reserve funds that the entrepreneur keeps in case of unfavorable conditions.
The presence of the domestic futures market will allow:
1) Strengthen direct ties between producers and consumers of exchange products by providing them with the opportunity to insure themselves against changes in the price level.
2) Significantly simplify the process of selling goods through the introduction of a system for the circulation of warehouse obligations (warrants) - documents of title that give the right to its owner to receive goods directly from the warehouse.
3) To give transactions made on the exchange a mass character by organizing exchange trading in obligations to the clearing house to accept or deliver a standard consignment of goods in the form of transfer of warehouse certificates (warrants).
4) guarantee the execution of any transaction made on the stock exchange.
5) to ensure a balance between supply and demand by creating a guarantee fund at the clearing house and making guarantee contributions to the clearing house by each participant in exchange trading.
6) Significantly increase the rate of cash flow.
7) sharply reduce distribution costs.
8) provide banks and other credit institutions that are members of the clearing house, to their customers a new type of service - making on-call transactions (on demand).
1. HISTORY OF THE ORIGIN OF WORLD AND RUSSIAN FUTURES EXCHANGE
The history of modern futures exchange trading began in the US Midwest in the early 1800s, and was closely linked to the development of commercial activity in Chicago and the grain trade in the Midwest. At certain times of the year, agricultural products (meat and grain) significantly exceeded the current needs of meat processors and flour millers, which led to the maximum reduction in prices. While in lean years, prices skyrocketed, and the townspeople experienced difficulties with food. Transport problems further exacerbated the problem. Then, due to the difficult conditions of transportation and marketing, farmers and merchants began to practice concluding contracts with the subsequent delivery of goods. For the first time, advance, preliminary contracts for the supply of corn were entered into by river merchants who received grain from farmers in late autumn or early winter, but had to store it until the corn was dry enough to be loaded onto a ship, and the river or channel was free from ice. To mitigate the risk of falling prices during winter storage, these traders traveled to Chicago and contracted with processors to supply them with grain in the spring. So they guaranteed themselves buyers and prices for grain. For the first time such a contract was registered on March 13, 1851 for 3 thousand bushels (about 75 tons) of corn for delivery in June at a price per bushel 1 cent lower than on March 13. Gradually, the grain trade expanded, and in 1842 the central market institution, the Chicago Mercantile Exchange (ChTB), was organized. In 1865, the CTB took a step towards formalizing the grain trade through the development of standard, model agreements called futures contracts. These correspondence contracts, as opposed to advance contracts, are standardized in terms of quality, quantity, terms and places of delivery of the goods for which the transaction was made.
In the same year, a system of guarantee fees was introduced in case buyers and sellers fail to fulfill their contracts. Under this system, participants in transactions must make cash contributions to the fund of the exchange or pay a fee to the representative of the exchange. These fundamental principles of futures trading remain in force today.
With the formation of new commodity exchanges in the late 19th and early 20th centuries, contract futures trading began to grow. The nomenclature and variety of futures contracts gradually expanded. A similar trade in precious metals, industrial goods, products of manufacturing, food and processing industries, as well as goods unsuitable for long-term storage, began to develop.
Futures exchange trading is one of the most dynamically developing sectors of the capitalist economy. It developed especially rapidly in the post-war period, which was reflected in the increase in the number of exchange goods, the emergence of new futures exchanges.
In Russia, the first commodity exchange was established by Peter I in 1703 and opened in St. Petersburg.
Compared with Western Russian stock exchanges had a number of differences. First, the low level of exchange technology. Secondly, the exchanges often assumed the function of representing the interests of the merchants, while none of the Western exchanges performed this function, since such representation was carried out there through chambers of commerce created as a result of a long political and economic struggle of entrepreneurs for their goals. . Thirdly, the ordinary attitude towards stock exchanges in Russia has always been ambiguous. Often the opinion prevailed that a decent person had nothing to do on the stock exchange.
In 1911, according to the Ministry of Trade and Industry, there were 87 exchanges in Russia, most of them were commodity exchanges, which were dominated by transactions for the sale of agricultural products, raw materials, etc.
After 1917, all exchanges were closed, but in July - December 1921 (the first years of the NEP) there was a revival. However, their efficiency was low, as evidenced by their exchange turnover: in the period from 1921 to 1922. of the 31 exchanges surveyed, only 6 had an average monthly turnover exceeding 100 thousand pre-war rubles, 22 exchanges did not reach 50 thousand rubles, and 11 exchanges - 10 thousand rubles. In the exchange turnover were basically the same goods as before the war - food and fodder. Textiles, raw materials, metal and leather products, fuel were represented on the stock exchanges insignificantly. Gradually, however, exchange trading began to fade, and at the end of the 1920s, Soviet exchanges were liquidated.
The new life of domestic commodity exchanges began in 1991. And in June 1992, the leaders of 4 Moscow commodity exchanges - MTB, RTSB, MBCM and metal exchanges - signed a memorandum on inter-exchange cooperation to create a contract market.
2. ORGANIZATION OF FUTURES TRADING
Futures transactions are concluded for a certain number of contracts, and not for the quantity of goods (the quantity of goods is determined by the number of concluded contracts) and only for one standard type of goods established by this exchange. This is the so-called basic variety. Sometimes, in addition to the basic variety, the exchange establishes several more varieties that can replace the basic variety. In this case, the calculation is made on the basis of the quotation of the basic grade with a discount (discount) but the established norms for a product of a lower grade and with a surcharge (premium) for a product of a higher grade "). The seller is given the right to choose the type of goods offered for delivery (within the limits allowed by the general conditions).
The infrastructure of the futures market consists of three parts.
1. Exchanges- places for trade. The exchange is a non-profit organization whose main purpose is to organize and coordinate the work of all departments that ensure the functioning of the futures market (clearing house of exchange warehouses, members of the exchange and clearing house, independent centers for analyzing the quality of exchange goods and others).
2. Clearing house, which is the central link of the exchange infrastructure. It is a body that guarantees the fulfillment of obligations under exchange contracts (futures) and carries out settlements between participants in exchange trading. Therefore, when making settlements, the parties to transactions undertake obligations to the clearing house. The clearing house organizes all settlements on operations with futures (exchange) contracts and performs the function of operational regulation of exchange trading, the purpose of which is to ensure the balance of the futures market. In addition, the function of the clearing house includes control over the supply of goods (the transfer of warrants is controlled). But the clearing house is not involved in attracting deposits and issuing loans.
3. Exchange warehouse systems, which are separate legal entities completely independent of the exchange, registered on the exchange and included in the list of official exchange warehouses. Such warehouses store goods coming as fulfillment of obligations under futures contracts in strict accordance with the conditions established by the exchange.
When concluding a transaction, both the buyer and the seller of the contract make a security deposit, a fee (margin), which is financial security for the ability of the buyer and seller to fulfill obligations under the futures contract - to sell or buy goods if the position is not compensated by the time the contract expires. Its size is set by the Clearing House and differentiates depending on the type of seller (manufacturer, intermediary, etc.; for the first one it is 1.5-2 times lower). When the market is unstable, a larger contribution is usually required, when the market conditions are stable, the contribution is less. In addition, there are contributions to hedge and speculative accounts. For hedging accounts, as less risky, exchanges and brokerage firms usually charge lower fees. (5, p.357) The amount of the deposit is also affected by the degree of price volatility and the time remaining until the delivery of the goods. The value of the security deposit is set from 5 to 18% of the contract value. In the month of delivery of goods under the contract, the guarantee deposit can reach 100% of the cost of the goods. (3).
In futures markets, in addition to profiting from rising prices when buying futures contracts or falling prices when selling them, you can benefit from the spread, i.e. price difference when simultaneously buying and selling two different futures contracts for the same commodity (butterfly trade). Starting such an operation, the bidder takes into account the ratio of prices for two contracts to a greater extent than their absolute levels. He buys the contract, which is considered cheap, while he sells the contract, which turned out to be expensive. If the movement of prices in the market goes in the expected direction, the exchange player profits from the change in the ratio of contract prices. Such transactions are inherently less risky and protected, and thus less risky than simple futures transactions. Spreading can almost always provide protection against losses associated with unexpected price fluctuations or extreme volatility.
3. FUTURES CONTRACT
The subject of a futures transaction is a futures contract - a document that defines the rights and obligations to receive or transfer property (including money, currency values and securities) or information, indicating the procedure for such receipt or transfer. However, it is not a security. (2). A futures contract cannot simply be canceled, or, in exchange terminology, liquidated. If it is concluded, it can be liquidated either by concluding an opposite transaction with an equal amount of goods, or by delivering the stipulated goods within the time period stipulated by the contract. In the vast majority of cases, compensation takes place, and only 1-3% of contracts deliver physical goods. Delivery of goods on futures exchanges is allowed in certain months, called positions. For example, on the New York Coffee, Cocoa and Sugar Exchange, it is allowed only in March, May, July, September and December, and the seller can deliver the goods on any day of the month. However, sellers of exchange contracts go for the supply of goods under them only in special cases, since this is associated with additional costs compared to selling it on the real goods market. In forward transactions, the buyer does not expect to receive the values he buys, and the seller does not expect to transfer the values he sells. The result of such transactions is not the transfer of real goods, but the payment or receipt of the difference between the price of the contract on the day of its conclusion and the price on the day of execution. For example, a seller sold a shipment of copper on the stock exchange in January at a price of £960. Art. per 1 ton with delivery in March. If, by the time of delivery, the price on the exchange for copper rises to 965l. Art. for 1 ton, he will be the losing side, and the buyer, on the contrary, will be the winner. The seller, as the losing party, must pay the difference of £5. Art. by concluding a so-called reverse (offset) transaction, that is, a transaction for the purchase of the same batch of goods at a price of 965 pounds. Art. for 1 ton, or, but in exchange terminology, to liquidate the contract. The buyer, in turn, enters into an offset transaction in March, that is, a transaction for the sale of the same batch of goods at a price of 965l. Art. for 1 ton, and thus gains 5l. Art. for 1 ton. In transactions for a period, one side always wins, the other loses.
To maximize the speed of the conclusion of futures transactions, facilitate the liquidation of contracts and simplify the settlement of them, there are completely standardized forms of futures contracts. Each futures contract contains the quantity of goods established by the rules of the exchange. For example, sugar - 50 tons, rubber, copper, lead and zinc - 25 tons, coffee - 5 tons, etc. The deviation of the actual weight from the contract should not exceed 3%.
When concluding a futures contract, only two main conditions are agreed upon: price and position (delivery time). All other conditions are standard and determined by the exchange rules (except for contracts for non-ferrous metals, which also indicate the amount of goods - most often 100 tons).
The delivery time for a futures contract is set by determining the duration of the position. For example, the standard contract of the London and other exchanges for rubber can be concluded for each separate subsequent month - a monthly position; for sugar, cocoa, copper, zinc, tin, lead - for each subsequent three-month position. (8, p.6) All futures contracts, unlike contracts for real goods, must be immediately registered with the clearing house located at each exchange. After the registration of the futures contract, the members of the exchange - the seller and the buyer - no longer act in relation to each other as parties who have signed the contract. They only deal with the clearing house of the exchange. Each party may unilaterally liquidate the futures contract at any time by entering into an offset transaction for the same amount of goods. The liquidation of a futures contract involves paying the clearing house or receiving from it the difference between the price of the contract on the day of its conclusion and the current price.
If the futures contract has not been liquidated before its expiration by concluding an offset contract, then the seller can deliver the real product, and the buyer can accept it on the terms determined by the rules of this exchange. In this case, the seller must, no later than 5 exchange days before the onset of the urgent position, send through a broker to the clearing house of the exchange a notice (called "notice" in the USA, "tender" in England) about his desire to hand over the real goods. The next day, the Clearing House selects the buyer who bought the contract first, and sends him a notice of delivery through his broker, at the same time informing the seller's broker who the goods are intended for. (3).
The buyer, who wishes to accept the real goods under the contract, receives a warehouse receipt against a check drawn in favor of the seller. Delivery of real goods ends a limited number of futures transactions (less than 2%). (8, p.7)
4. MAIN FEATURES OF EXCHANGE FUTURES TRADING AND FACTORS INFLUENCING ITS DEVELOPMENT.
The main features of futures trading are:
The fictitious nature of transactions, in which the sale and purchase takes place, but the exchange of goods is almost completely absent. The purpose of transactions is not the use value, but the exchange value of the commodity;
Predominantly indirect connection to the real commodity market through hedging (SEE BELOW), rather than through the delivery of the commodity;
Complete unification of the use value of a commodity, potentially represented by an exchange contract, directly equated to money and exchanged for it at any moment. In the case of delivery under a futures contract, the seller has the right to deliver goods of any quality and origin within the limits established by the rules of the exchange;
Full unification of conditions regarding the quantity of goods allowed for delivery, place and delivery time;
The impersonal nature of transactions and the substitutability of counterparties for them, because they are concluded not between a specific seller and buyer, but between them or even between their brokers and the clearing house, which assumes the role of a guarantor of the fulfillment of the obligations of the parties when they buy or sell exchange contracts. (4, p.28)
There are many factors that affect stock futures trading. These are changes taking place in the conditions of the development of the economy as a whole, in international trade in individual goods and in the implementation of exchange trading itself. The cyclic nature of reproduction has a direct impact on the dynamics of exchange trading. In a downturn, competition is intensifying, integration processes are accelerating, and at the same time, exchanges are stepping up their efforts to introduce new products and trading methods. However, the cyclicity in exchange trading is not in strict accordance with the industrial cycle for a number of reasons, in particular, the peculiarities of the production of agricultural products (the bulk of exchange goods), which, in addition to the general ones, is subject to its own laws, etc. Trade in agricultural commodities is hampered during long recessionary periods of overproduction. At this time, prices are relatively reduced and stabilized. While unforeseen natural disasters (drought, floods, etc.) usually lead to a significant increase in the volume of transactions.
Also, one of the determining conditions for the development of futures exchanges is the state of the monetary and financial system, as well as the availability of sufficient financial resources. As a rule, futures exchanges are created in leading financial centers, where there are ample opportunities for financing trade and speculation in exchange commodities, which are convenient objects of collateral transactions in active futures trading. Without bank lending, as well as without a sufficient supply of free cash that does not find a profitable productive application, any significant futures trading becomes impossible. At the same time, as the mass of free funds grows, depreciating due to inflation, the expansion of exchange turnover becomes an important element in the functioning of the entire market economy.
Currency volatility also affects the growth rate of exchange trading. The transition to a system of freely convertible currencies from the end of the 50s contributed to a noticeable acceleration in the growth rate of futures trading. Departure from the gold exchange standard in the late 60s - early 70s, the spread of the system of "floating" exchange rates increased the risks associated with the implementation of trade transactions, and directly led to a sharp increase in exchange transactions, including transactions with currencies.
The trend towards an increase in the degree of processing of raw materials in exporting countries also has a certain impact on the development of exchange trading.
The expansion of the turnover and geography of futures trading is an additional factor in the growth of its volume. The concentration of exchange trading and the improvement of its structure ensured the emergence of new functions of futures exchanges and the further expansion of exchange turnover. (5, p. 257)
5. HEDGING FUTURES
One of the goals pursued by participants in transactions when concluding transactions on the stock exchange is insurance against possible price changes (hedging).
Such transactions are carried out both with real goods and with futures contracts, but in speculative transactions with futures contracts between the seller and the buyer, no direct settlements are made. As already noted, for each of them, the opposite side of the transaction is the clearing house of the exchange. It pays the winning party and accordingly receives from the losing party the difference between the value of the contract on the day of its conclusion and the value of the contract at the time of execution. A futures transaction can be liquidated (not necessarily at the end of the contract, but at any time) by paying the difference between the sale price of the contract and the current price at the time of its liquidation. This is called buyback of previously sold or sale of previously purchased contracts. Speculators who play on the derivatives exchange on rising prices are called "bulls", and speculators who play on a fall are called "bears".
Futures transactions are usually used for hedging insurance against possible losses in case of changes in market prices when concluding transactions for real goods. Hedging is also used by firms that buy or sell goods for a period of time on the exchange of real goods or over the counter. Hedging operations consist in the fact that the company, selling a real product on the exchange or outside it with delivery in the future, taking into account the price level existing at the time of the transaction, simultaneously performs a reverse operation on the derivatives exchange, that is, it buys futures contracts for the same period and for the same amount of goods. A firm that buys a real commodity for delivery in the future simultaneously sells futures contracts on the exchange. After the delivery or, respectively, acceptance of the goods in a transaction with real goods, the sale or redemption of futures contracts is carried out. Thus, futures transactions insure transactions for the purchase of real goods from possible losses due to changes in market prices for this product. The principle of insurance here is based on the fact that if in a transaction one party loses as a seller of real goods, then it wins as a buyer of futures for the same amount of goods, and vice versa. Therefore, the buyer of the real good hedges with a sell, and the seller of the real good hedges with a buy.
Hedging by selling ("short" hedging) is the sale of futures contracts on the futures exchange when purchasing an equal amount of real goods in order to insure against the risk of falling prices by the time the real goods are delivered. A "short" hedge is typically used to secure the selling price of a real commodity that is or will be owned by a trader, farmer, processor or extractor. (6, p. 303) For example, a reseller (intermediary, dealer, agent) buys large quantities of seasonal goods (grain, cocoa beans, rubber, etc.) in a certain, usually relatively short period in order to then ensure the full and timely delivery of goods according to the orders of their consumers. Without resorting to hedging, he may incur losses in the event of a subsequent possible decrease in the prices of his goods in stock. To avoid this or reduce the risk to a minimum, he, simultaneously with the purchase of real goods (whether on the exchange or directly in the producing countries), makes a hedging sale, that is, he concludes a deal on the exchange for the sale of futures contracts providing for the delivery of the same amount of goods. When a merchant resells his product to a consumer, let's say at a lower price than he bought, he suffers a loss on the transaction with the real product. But at the same time, he buys back previously sold futures contracts at a lower price, as a result of which he makes a profit. Direct consumers of exchange goods (cocoa beans, rubber, etc.) often also resort to hedging by selling when they buy these goods for a period.
A buy hedge (a "long" hedge) is the purchase of futures contracts to insure the selling price of an equal amount of a real commodity, which the trader does not own, for delivery in the future. The purpose of this transaction is to avoid any possible losses that may result from a price increase on an item already sold at a fixed price but not yet purchased ("uncovered"). For example, a flour mill has a contract to sell flour at an agreed price for delivery in two months. However, due to lack of storage space, it is forced to postpone the purchase of wheat until the date of delivery, taking into account the time required for grinding, packaging and transportation. Fearing that prices may rise by the time the wheat is purchased, the mill buys enough futures contracts on the futures exchange to cover its deal. If the price of wheat rises by the time it buys grain for milling, it will lose on the real commodity, but at the same time sell its futures at a higher price on the futures exchange and use the profit to cover the losses on the deal with real goods. The same result will be achieved if wheat prices fall by the time of purchase: the flour mill will suffer losses on the futures exchange, but will make a profit when buying real goods. (8, p.9)
Over time, the commodity exchange ceases to perform the function of exchanging cash goods, but retains the function of pricing, "opening" prices. Futures exchanges are turning into a kind of epicenter of price signals. Prices set on the stock exchange serve as a benchmark, a starting point for physical commodity markets. (4, p.68)
The exchange is a market of contracts and in this sense, without linking the movement of large masses of goods, it equalizes supply and demand, creates the most price-elastic permanent demand and permanent supply. The supply of a real producer and the demand of a real consumer of raw materials are not very price elastic. The producer of raw materials will not increase its production, responding to fleeting and rapidly changing price fluctuations of 1/100 of a cent, and most importantly, the expansion of production requires, as a rule, capital investments. The consumer of raw materials will also not expand or reduce their stocks due to the slightest fluctuations in price. Therefore, price fluctuations that have arisen due to the discrepancy between real demand and real supply, which are weakly elastic in price, are not extinguished immediately, but turn into sharp price fluctuations. It is exchange demand and exchange supply that create a mechanism for curbing price fluctuations, preventing sharp fluctuations in commodity prices, which stabilizes the economy as a whole and allows a market economy, in principle, to dispense with state price regulation. Stock exchange speculation is not a mechanism for ballooning, but for stabilizing prices.
Stabilization of prices is facilitated by the very fact of the presence of exchange demand and supply. The function of price stabilization is carried out through the mechanism of exchange speculation, which provides for a game for both raising and lowering prices and includes actions that contribute to both their real increase and their real decrease. The actions of "bulls" and "bears" under normal conditions balance each other, which also contributes to price stabilization.
Important factors for price stabilization are the transparency of transactions, the public setting of prices at the beginning and end of the exchange day (exchange quotation), limiting daily price fluctuations to the limits established by exchange rules (for example, no more than 2% per day in relation to the closing price of the exchange on the previous day). ). An essential role is also played by the collection and processing of information that the exchange makes available to its members, customers and the general public. This information relates to the production of exchange goods, the dynamics of demand for them, the availability of goods in exchange warehouses, prices in the exchange and non-exchange markets of other countries, etc.
The unity of the exchange and non-exchange markets, the organizing role of the exchange in the entire system of the market economy, is most clearly manifested precisely in the process of exchange and over-the-counter pricing. Although only a small part of exchange goods passes through the channels of the exchange, however, exchange quotes have a decisive influence on the prices of the non-exchange market. These prices may differ from stock quotes, as the conditions and terms of deliveries on the exchange and non-exchange markets may differ, and the saturation of these markets with the supply of goods may vary by season (for example, for agricultural raw materials). But the gaps between exchange and non-exchange prices cannot be significant, since there is always the possibility of switching part of the goods from the free (non-exchange) market to the organized (exchange) market, and vice versa.
At the same time, free market prices have, in a certain sense, a determining influence on the ratio of exchange prices of different types of goods. High liquidity and repeated resale of the exchange commodity presuppose its unification and homogeneity. Meanwhile, absolutely homogeneous goods do not exist, each product differs in dozens of varieties. Exchange rules provide: contracts fix only the basic grade of goods, and only its price is quoted and published. However, in addition to the base grade, other grades allowed by the exchange rules can be used to fulfill contracts, and the supply of goods of higher grades (compared to the base grade) leads indisputably to premiums on the price of the base grade, and lower grades to price discounts. . The mechanism for determining price premiums and discounts is established by exchange rules - it fixes the price differences of different varieties in the non-exchange market on a certain date. Thus, if stock quotes have a stabilizing effect on the general trend of price dynamics, then free market prices, current demand and supply in this market for goods of a specific quality and specific industrial purpose, affect the structure of stock prices. The close interaction of the prices of the exchange and non-exchange markets gives stability to the entire system of market pricing. (10, p.10)
Exchanges also contribute to the stabilization of money circulation and facilitate credit. The exchange increases the capacity of money circulation. The exchange is also one of the most important areas for the application of loan capital, since it provides reliable collateral for loans (commodities and securities) and reduces risk to a minimum.
7. FUTURES COMMODITY MARKET IN MODERN RUSSIA. PROBLEMS AND PROSPECTS OF DEVELOPMENT.
The formation of the first exchange markets in America and Europe was gradual. First, a real commodity market was formed, then a futures market, the contracts of which were executed after a specified period. Then came the financial and finally the futures market. (11) In Russia, the futures market has existed for only three or four years. Moreover, according to estimates, at the end of 1991 there were about 500 stock exchanges, of which 60% were in Moscow. Now a little over 70 are officially registered with the Commodity Exchange Commission throughout Russia. Initially, futures contracts were concluded for the US dollar and the German mark, since, in an unstable economy, playing on currency fluctuations was the most profitable type of financial transactions. Then attempts were made to launch an urgent commodity market. in particular, there were scandium futures on the Russian Exchange, and sugar futures on MTB. (12) But nothing happened. This happened due to the fact that the fact that the exchange should not only provide a service, but also act as a guarantor for the fulfillment of obligations was not taken into account. Moreover, another financial institution can also be a guarantor, but the exchange is obliged to find it. However, there were problems with guarantees. This is not surprising, because the stock exchanges do not currently have the financial capacity to form and maintain sufficient insurance inventory that can be a reliable guarantee for the execution of exchange futures transactions, are not provided with storage facilities and other necessary infrastructure. Solving these issues through the formation of a network of guarantor suppliers on a contractual basis from among commercial structures does not provide those guarantees of reliability that are required at the stage of creating this market. (13) In addition, a serious problem lies in the standardization of the terms of sale. (11) After analyzing the previous mistakes, the experts of the Russian Exchange proposed a new trading technology. It is based on guarantees for the execution of futures contracts by the state represented by the State Committee for Reserves, with which contracts are concluded for borrowing products that meet the requirements of the current standard in terms of quality, packaging and labeling.
Petroleum products, timber products and sugar are offered as the main basic products for quotation on the futures market. Futures for sugar promise to be especially promising. To insure against losses, members of the Sugar Settlement Chamber of the Russian Exchange (RTSB) (which includes companies such as Alfo-Eco, Menatep-Impex, the Siberian Sugar Company, JSC Rosshtern, Razgulay Trading House, Prodeximport ", the Sugar company and the Babaevskaya confectionery factory) decided to take part in the organization of the futures market, which will allow us to hope that a new attempt to launch a commodity futures will be much more successful than the previous ones. (12)
Russian stock exchanges began to reach a qualitatively new level of trade organization. Today, their activities are largely focused not on the organization of commodity circulation and the restoration of economic ties, as it was at the beginning, "but on servicing the trading process. It involves price quotation, providing an opportunity for participants in exchange trading to insure their price and profit and transactions with real goods in the futures market , prompt and accurate settlement of exchange transactions, the provision of guarantees for the execution of transactions by participants in exchange trading.
However, it must be admitted that, despite their youth and many emerging problems, Russian exchanges have achieved certain results. There is an evolutionary development of exchange activity from transactions for cash to forward transactions (for example, the turnover of the Samara Exchange in forward contracts for wheat in 1995 amounted to 7.7 billion rubles), through them to futures contracts (the total value of transactions with futures contracts for lead, aluminum and its alloys, copper and nickel on the Moscow Non-Ferrous Metals Exchange over the same period exceeded 724.3 billion rubles).
However, with all the positive moments in the development and improvement of exchange trading, there are a number of problems that commodity exchanges cannot solve on their own, despite the high degree of self-government and self-regulation.
A natural question arises about the need to create a legislative framework for such economic phenomena as futures and options trading, since the only mention of these types of exchange trading takes place only in the Law of the Russian Federation "On commodity exchanges and exchange trading", adopted back in 1992. Currently, some of its provisions have become a serious obstacle to the exchange futures market. In particular, this applies to the ban on founding and membership on the stock exchange of banks, credit institutions, insurance, investment companies and funds. This restriction is planned to be lifted when amendments are made to the said Law, which are being developed by the Commission on Commodity Exchanges.
In addition, potential participants in futures trading - direct producers and consumers of raw materials, as well as banks and credit institutions do not have sufficient information about the goals and rules of futures exchange trading, as well as about the opportunities that the futures market provides them. The lack of a legal framework, clear "rules of the game" and any state regulation in the futures market, as well as an underestimation of the need for its development, have led to the fact that it looks like a kind of blank spot in the economy.
To change the current situation, the State Committee of the Russian Federation for Antimonopoly Policy and Support of New Economic Structures (SCAP RF) developed a draft resolution of the Government of the Russian Federation "On the development of futures markets". The essence of the project is the government's support of futures trading on commodity exchanges, which will create market mechanisms for pricing the most important raw materials and the regulatory impact of the state on commodity markets. The development of futures markets will increase the attractiveness of lending by commercial banks to relevant industries, expand the range of services provided by banks, and enable participants in exchange trading to insure against adverse changes in price conditions.
One of the main objectives of the developed draft resolution is to assist commodity exchanges in the development of futures trading. For these purposes, it is proposed to give Roskomrezerv the right to act as a guarantor of the execution of exchange futures contracts on a contractual basis. The creation of insurance reserves to ensure futures trading at the expense of state material reserves will solve the problem of insurance of participants in exchange futures trading. At the same time, the state reserve is not actually spent, and products are temporarily borrowed on the basis of contracts (agreements) concluded by the relevant state reserve management body with recipients, since a mechanism is provided for the mandatory renewal of goods at the expense of exchanges. Additional funds from the budget for these purposes are not required. On the contrary, state reserves indirectly become capital, which participates in commercial turnover and brings additional funds to the country's budget in the form of taxes.
The introduction of the proposed mechanism will reduce budget costs for financing the purchase of material resources to the state reserve for the purpose of its renewal, since the renewal of reserves will occur naturally as material resources are released from the state reserve and subsequently returned.
In general, the implementation of these measures should lead to the stabilization of prices in the main commodity markets and the definition of the role of the state in their formation and regulation in place of the previously lost functions.
The prospect of futures market development involves the creation of a new form of contractual relations in the form of an assignable warehouse receipt - a commodity certificate, which is a universal tool for executing futures transactions and capable of performing functions that facilitate mutual settlements of futures trading participants. In particular, it can serve as an ordinary warehouse receipt that allows its owner to receive the goods on time, as a means of executing delivery under futures contracts as a document giving the right to receive goods, and also serve as a collateral in exchange trading in futures contracts to ensure their execution and serve as a basis for issuance of a bank loan. This type of lending is especially attractive, because. in case of non-repayment of the loan, the bank becomes the owner of the products provided by the warehouse receipt. In addition, a loan secured by a transferable warehouse receipt can be issued to any owner of this product (not just the manufacturer), which speeds up the turnover of funds. The creation of insurance reserves of real goods makes it possible to increase the reliability of operations in the futures market and attract commercial banks directly to the game on the stock exchange. In this regard, the draft resolution proposes to develop and submit for approval to the Government of the Russian Federation an appropriate Regulation on transferable warehouse receipts (commodity certificates) within three months.
A special role in the project is assigned to the Commission on Commodity Exchanges under the State Committee of the Russian Federation for Antimonopoly Policy and Support for New Economic Structures as a state body that will control the procedure and rules for futures and options trading on stock exchanges.
The consequences of the government's adoption of this resolution are expected to be very positive. Its implementation will strengthen direct ties between producers and consumers of goods, improve the system of goods distribution through the introduction of commodity receipts (commodity certificates) into circulation. Transactions made on the stock exchange should acquire a mass character, the balance between supply and demand will increase. The rate of money turnover will increase, the share of credit capital of commercial banks and their interest in working on commodity markets will increase significantly.
When such legislation will be adopted remains a matter of time, and whether it will be properly enforced is also unknown.
CONCLUSION
The formation of exchange trading is a primary problem in wholesale trade. Although Russia produces almost all goods that are the subject of exchange trading, and at the beginning of 1992 in Russia there were, as I said above, more than 500 commodity exchanges, even trade in such homogeneous goods as oil, grain, timber is poorly developed in the country. The main obstacle is the strong administrative regulation of commodity flows (in the oil industry - through the attachment of oil refineries to oil companies, in agriculture - a large share of government purchases and control by regional and local authorities, etc.). The lack of exchange trading does not allow economic agents to use "fair price benchmarks" as a starting point.
If we take into account that in the world practice the volumes of derivatives operations exceed the volumes of transactions with immediate execution, then we can assume that the prospects for the development of the derivatives market in Russia are great. The only question is how soon they can be realized. I would like to believe that futures trading will develop in our country and over time will be able to become a real price regulator in the country's commodity markets.
Bibliography
1. Law of the Russian Federation "On Commodity Exchanges and Exchange Trade" of February 20, 1992 as amended by Laws of the Russian Federation of 06/24/92 N3119-1, 04/30/93 N4919-1, Federal Law of 06/19/95 N89-FZ.
2. Letter from the Commission on Commodity Exchanges under the SCAP dated July 30, 1996 N16-151/AK "On Forward, Futures and Option Exchange Transactions".
3. Appendix 1 to the Regulations on the Clearing House
4. Vasiliev G.A., Kameneva N.G. "Commodity exchanges" - M., "Higher school", 1991
5. "Portfolio of a business person. Exchange portfolio." - M., "Somintek", 1993
6. How to sell your product in the foreign market. Directory. - M., "Thought", 1990
7. Aleksashenko and others. "Ways of Russian reforms" - IVF - 1996 - N5
8. Gerchikova I. "International Commodity Exchanges" - Economic Issues - 1991 - N7
9. "Personnel and technology will determine success in the futures market" - Financial news - 04/27/95
10. Manevich V. "Functions of the Commodity Exchange and the Main Directions of the Exchange Policy in the Conditions of Transition to the Market" - Issues of Economics - 1991 - N10
11. Mishin S., Nazarova L. "Today is a game, tomorrow is business" - Economics and Life - 1996 - November - N44 - p.5
12. Samovarshchikova O. "New opportunities for commodity futures" - Economics and life - 1996 - N44 - p.7
13. Frolova A. "Playing by the rules is beneficial to everyone" - Economics and life - 1996 - February - N7 - p.5
Futures (futures transaction) - a transaction concluded on the stock exchange for a standardized amount of the underlying asset or financial instrument of a certain quality with standardized terms for the execution of the transaction. When a transaction is made, the seller of the contract undertakes to sell, and the buyer - to buy the underlying asset or financial instrument at a certain time in the future at a price fixed at the time of the transaction. We can say that the standardized forward on the exchange becomes a futures contract.
Unlike a forward, the exchange takes over the development of futures trading rules. The object of a futures transaction is not an exchange commodity, but an exchange contract, which provides for the sale and purchase of a strictly agreed amount of goods of a certain grade with minimum allowable deviations. The terms of the futures contract are standard.
A futures transaction is a type of transaction on a stock or commodity exchange. The terms of a futures transaction involve the transfer of a share or commodity with the payment of a sum of money after a certain period of time after the conclusion of the transaction at the price specified in the contract.
Distinguish between simple and premium futures transactions.
In the first case, the fulfillment of obligations within the terms specified by the terms of the transaction at the rates or prices fixed at the time of its conclusion is stipulated. The second one provides for the payment of a premium by one of the counterparties, for which the other receives the right to refuse it from the transaction or revise its initial conditions.
Exchange futures transactions are concluded, as a rule, not for the purpose of selling securities or goods, but for the purpose of obtaining a difference in prices or rates that arises by the closing date of the transaction to the liquidation period, usually set in the middle or end of the month. In a futures transaction, sellers are interested in lowering the price (rate), while buyers, on the contrary, are interested in raising it. There is an opportunity to play on the difference in prices, which gives considerable benefits. In exchange practice, the game for an increase in the rate was called a report, and for a decrease - a deport.
The subject of a futures transaction is a futures contract - a document that defines the rights and obligations to receive or transfer property (including money, currency values and securities) or information, indicating the procedure for such receipt or transfer. However, it is not a security. A futures contract cannot simply be canceled, or, in exchange terminology, liquidated. If it is concluded, it can be liquidated either by concluding an opposite transaction with an equal amount of goods, or by delivering the stipulated goods within the time period stipulated by the contract. In the vast majority of cases, compensation takes place, and only 1-3% of contracts deliver physical goods. Delivery of goods on futures exchanges is allowed in certain months, called positions. For example, on the New York Coffee, Cocoa and Sugar Exchange, it is allowed only in March, May, July, September and December, and the seller can deliver the goods on any day of the month. However, sellers of exchange contracts go for the supply of goods under them only in special cases, since this is associated with additional costs compared to selling it on the real goods market. In forward transactions, the buyer does not expect to receive the values he buys, and the seller does not expect to transfer the values he sells. The result of such transactions is not the transfer of real goods, but the payment or receipt of the difference between the price of the contract on the day of its conclusion and the price on the day of execution. For example, a seller sold a shipment of copper on the stock exchange in January at a price of £960. Art. per 1 ton with delivery in March. If, by the time of delivery, the price on the exchange for copper rises to 965l. Art. for 1 ton, he will be the losing side, and the buyer, on the contrary, will be the winner. The seller, as the losing party, must pay the difference of £5. Art. by concluding a so-called reverse (offset) transaction, that is, a transaction for the purchase of the same batch of goods at a price of 965 pounds. Art. for 1 ton, or, but in exchange terminology, to liquidate the contract. The buyer, in turn, enters into an offset transaction in March, that is, a transaction for the sale of the same batch of goods at a price of 965l. Art. for 1 ton, and thus gains 5l. Art. for 1 ton. In transactions for a period, one side always wins, the other loses.
To maximize the speed of the conclusion of futures transactions, facilitate the liquidation of contracts and simplify the settlement of them, there are completely standardized forms of futures contracts. Each futures contract contains the quantity of goods established by the rules of the exchange. For example, sugar - 50 tons, rubber, copper, lead and zinc - 25 tons, coffee - 5 tons, etc. The deviation of the actual weight from the contract should not exceed 3%.
When concluding a futures contract, only two main conditions are agreed upon: price and position (delivery time). All other conditions are standard and determined by the exchange rules (except for contracts for non-ferrous metals, which also indicate the amount of goods - most often 100 tons).
The delivery time for a futures contract is set by determining the duration of the position. For example, the standard contract of the London and other exchanges for rubber can be concluded for each separate subsequent month - a monthly position; for sugar, cocoa, copper, zinc, tin, lead - for each subsequent three-month position. All futures contracts, unlike contracts for real goods, must be immediately registered with the clearing house located at each exchange. After the registration of the futures contract, the members of the exchange - the seller and the buyer - no longer act in relation to each other as parties who have signed the contract. They only deal with the clearing house of the exchange. Each party may unilaterally liquidate the futures contract at any time by entering into an offset transaction for the same amount of goods. The liquidation of a futures contract involves paying or receiving from the clearing house the difference between the price of the contract on the day of its conclusion and the current price.
If the futures contract has not been liquidated before its expiration by concluding an offset contract, then the seller can deliver the real product, and the buyer can accept it on the terms determined by the rules of this exchange. In this case, the seller must, no later than 5 exchange days before the onset of the urgent position, send through a broker to the clearing house of the exchange a notice (called "notice" in the USA, "tender" in England) about his desire to hand over the real goods. The next day, the Clearing House selects the buyer who bought the contract first, and sends him a notice of delivery through his broker, at the same time informing the seller's broker who the goods are intended for. The buyer, who wishes to accept the real goods under the contract, receives a warehouse receipt against a check drawn in favor of the seller. Delivery of real goods ends a limited number of futures transactions (less than 2%).
An exchange transaction is defined in the Law of the Russian Federation "On commodity exchanges and exchange trading" as a registered exchange agreement concluded by participants in exchange trading in relation to an exchange commodity during exchange trading. To be recognized as an exchange, it must have a combination of certain features:
The subject of an exchange transaction must be an exchange commodity;
It must be concluded between the participants of exchange trading;
It must be concluded during exchange trading and registered on the exchange;
Participants in exchange trading on Russian exchanges can make transactions related to:
Mutual transfer of rights and obligations in relation to real goods (transactions for cash goods with immediate delivery);
Mutual transfer of rights and obligations in respect of real goods with a delayed delivery date (forward transactions);
Mutual transfer of rights and obligations in relation to standard contracts for the supply of exchange goods (futures transactions);
An assignment of rights to a future transfer of rights and obligations in relation to an exchange commodity or a contract for the supply of an exchange commodity (option transactions). Other transactions may also take place in relation to an exchange commodity, contracts or rights established by the rules of exchange trading.
Thus, exchange transactions can be divided into transactions made with real goods and transactions for a period without real goods.
Exchange trading as a form of organized wholesale market is divided into cash markets, futures and stock markets. In this regard, the following transactions can be made on the exchanges:
Purchase and sale of real goods, i.e. such transactions that provide for the mandatory sale of the goods after the auction or the immediate transfer of documents for the ownership of the goods.
When making a transaction for a real product, the seller must have the product in stock and present it for delivery within the period specified in the exchange agreement (contract).
In such a transaction, the seller must hand over the goods to the exchange warehouse and receive a special warehouse certificate - a warrant, pay for the insurance of his goods and its storage in the warehouse.
When the delivery time expires, the seller transfers the warrant to the buyer in exchange for a check (payment); according to it, he receives goods from the exchange warehouse.
With this type of transaction, the term for the delivery of goods from the warehouse to the buyer is determined by the exchange rules and, as a rule, ranges from 1 to 15 days.
A variation of a transaction for a real product is " transaction forward”, or forward transactions - transactions for the sale of goods with a delayed delivery date (in this case, the price of the goods and the delivery time are specified). In other words, forward transactions, or transactions for a period, provide for the delivery of real goods in the future.
Futures transactions provide for bidding without the obligatory subsequent delivery of goods. This is the sale of goods that have not yet been produced or are physically absent at the time of the conclusion of the transaction. In fact, there is an act of sale and purchase of the right to a future product. In other words, this is a transaction for the sale of standard contracts.
At the initial stage of the functioning of commodity exchanges abroad, exchanges of real goods (that is, real goods) dominated, which provided for the mandatory sale of goods after the auction.
Currently, there are very few commodity exchanges in the world that carry out transactions with real goods. They were replaced by futures exchanges, on which the vast majority of exchange transactions are currently carried out. Futures transactions are concluded for a product that has not yet been grown (not created), for example, for next year's harvest. A futures exchange (transaction) allows trading without the subsequent delivery of goods.
All exchange transactions, depending on the term of the contract, can be classified into cash, urgent and combined.
Cash transactions- Transactions with an immediate term for the execution of the contract. Cash transactions in the literature are often referred to as SPOT transactions. They are made "in the form of a purchase and sale immediately and for cash (aucomptant), with the delivery of papers from the hands of the seller to the hands of the buyer."
It should be noted that the “immediate deadline” for cash transactions is conditional, and such transactions are not actually concluded on the stock exchange. The immediate delivery of an exchange-traded asset does not occur immediately after receiving a counter-performance of an obligation, i.e., payment of money for an exchange commodity, but after a few days, after a short period of time specified in the rules of the exchanges.
Delivery times for cash transactions are set by the exchanges themselves. For example, on the St. Petersburg Stock Exchange, a cash transaction is one in which the period of transfer of securities to the buyer does not exceed 14 days.
The peculiarity of cash transactions lies in the fact that in cash transactions it is the actual delivery of the exchange asset, while in futures transactions in 97% of cases the contract is executed by mutual settlement between the parties. Cash transactions serve primarily actual demand, transactions for a period of time - speculation.
Urgent deals also called derivatives or derivatives in the literature. Futures transactions are characterized by the fact that the moment of the conclusion of the transaction and the moment of its execution do not coincide, the fulfillment of the obligation under such transactions lags behind the conclusion in time. This is the difference between term transactions and cash transactions. The time interval (term) between the conclusion of the contract and its execution for futures transactions is much longer than for cash transactions.
The next feature of futures transactions is that in most futures transactions, the contract is executed not by the actual delivery of the exchange asset, but by mutual settlement between the parties, i.e., the contract is executed mainly by paying the difference between the contract price and the price set by the exchange quotation on the day the obligation is fulfilled.
Another distinguishing feature of an urgent transaction, which makes it possible to distinguish the latter from a cash transaction, is the subject of the contract. If the subject of cash transactions is an exchange commodity that can actually (physically) be transferred to the counterparty, then in futures transactions the subject of the contract can be (in addition to the subjects of cash transactions) financial indices, the weather and the results of the presidential elections, the delivery of which is really impossible, and these transactions performed exclusively through mutual settlements between the parties.
Group urgent transactions, in turn, can be divided into three subgroups.
1) Settlement futures transactions- transactions, the execution of which is carried out exclusively through mutual settlements between counterparties. For such transactions, the party to the contract undertakes to pay the difference between the contract price and the quoted exchange price formed by the term of the contract. For example, on the Odessa stock exchange, most of the transactions for the supply of bread were transactions for the difference.
2) Deliverable futures deals- transactions, the execution of which is carried out by real delivery of an exchange-traded asset after a certain period established by the exchange, at a price determined at the time of conclusion of the contract. The range of subjects of such a transaction is narrower than that of a transaction for a difference, because real delivery of financial, weather and presidential indices is not possible, and they cannot be the subject of deliverable forward transactions.
3) Combined futures deals is a combination of the two previous futures deals.
Combined the group of transactions combines elements of cash and urgent transactions. REPO and SWAP transactions can serve as an example of such a transaction. The concept of a REPO transaction is given in the MICEX rules, where clause 1.1.28 states: “REPO transaction is a transaction with securities, consisting of two parts, the execution dates of which are determined by the settlement code. For the first part of the REPO transaction, on the date of its conclusion, the seller of securities is obliged to deliver securities, and the buyer is obliged to pay cash; on the date of execution of the second part of the REPO transaction, the buyer of securities under the first part of the REPO transaction is obliged to deliver securities, and the seller in the first part of the REPO transaction is obliged to pay the funds in accordance with the terms of the concluded REPO transaction.
Sellers (owners of goods) no later than the established period before trading give brokers operating on the exchange independently or through brokerage houses serving the exchange, orders to sell their goods. Orders are issued in writing. In this case, the broker must have a power of attorney to act on behalf of the seller.
The relationship between clients (sellers and buyers) and brokerage houses can be regulated by special contracts for brokerage services. Brokerage houses no later than the period established by the exchange before the start of trading submit an application to the exchange information channel, i.e. an offer to sell a certain product.
Public exchange trading, conducted at the so-called exchange meetings (or sessions), in its traditional form is based on the principles of a double auction, when increasing offers from buyers meet decreasing offers from sellers. If the prices offered by the buyers and the seller match, a deal is concluded. Each concluded contract is publicly registered and communicated to the public through the press and communication channels.
Each participant in exchange trading is required to have a pass corresponding to his status, available for visual observation by persons responsible for conducting trading. The basis for the conclusion of exchange transactions is the oral consent of brokers, reached as a result of openly conducted trading and recorded by a stock broker serving the relevant commodity section.
The absence of a broker in the section at the moment the broker announces his offer is regarded as his absence from the auction. The goods offered by him are withdrawn from the auctions held on this exchange day, and sanctions are applied to the broker, provided for by the rules of exchange trading.
When concluding a transaction, the broker-seller issues a ticket (order card), which is signed by the buyer and transferred to the registration office of the exchange for the preparation of an agreement (contract). Contracts are concluded by drawing up one document signed by the parties, as well as by a representative of the exchange.
In countries with market economies, commodity futures exchanges have developed, performing the function of price risk insurance with the help of futures contracts, i.e. hedging (from the English hedge - a fence, protection).
Hedging- operations on futures exchanges, allowing to insure against unfavorable price changes.
Hedging is an important risk mitigation tool for producers, processors and traders. For example, the seller is a farmer who has a field of oats. He does not know at what price the oats will be sold at the market in the autumn after the harvest. To be sure of the sale of oats, the farmer sells it on the exchange at a fixed price (fixed price) and, already guided by this price, he will build his future plans.
In turn, the buyer of oats - the producer of oatmeal, knowing how much he has to pay for oats, will build his production plans accordingly. The producer in this case will not worry about a possible increase in prices for oats. Thus, hedging gives the businessman a certain price confidence and the ability to go about his business without worrying about possible price changes.
When concluding a futures transaction, the contract specifies the price of the goods and the timing of their delivery. Delivery times are determined by special standards (rules) adopted at the stock exchange.
Participants in futures trading are divided into two groups: hedgers and speculators, since a large number of futures transactions on commodity exchanges are of a speculative nature. In these cases, the purpose of the futures transaction is to obtain the difference between the price of the contract at the time of its conclusion and the price at the expiration date of the contract.
Hedgers are sellers or buyers of cash physical commodities who trade in futures to hedge price risk. At the same time, sellers sell futures contracts in order to protect the future sale price of goods from a decrease, while buyers, on the contrary, buy futures contracts in order to protect the future purchase price of goods from an increase.
Exchange speculators (players) are individuals and legal entities who invest in trading futures contracts in order to profit from their resale. The main task of a stock speculator is to correctly predict changes in commodity prices in the future. The term "speculation" (from Latin speculatus) means to consider or investigate. Therefore, civilized speculation in exchange trading begins with the study of potential opportunities for profit, the study of futures and commodity markets.
Thus, a futures speculative transaction is carried out with the aim of making a profit in the face of price fluctuations. There are different types of speculative transactions. One of them is the one in which buyers (speculators) buy exchange contracts with the aim of their subsequent resale at a higher price. This type of speculation is called bullish play, and bull speculators are "bulls".
Another type of speculation is the game to lower prices. Speculators sell exchange contracts in order to buy them back at lower prices. Such speculators are called "bears". Futures transactions of this type are widely used in the stock market.
A variety of futures transactions are option transactions for the purchase and sale of rights to the future purchase or sale at a set price of goods or contracts for the supply of goods.
In our country, in the initial stage of perestroika (1991-1992), commodity exchanges were created as exchanges for real goods. However, in the future, they began to carry out futures trading along with trading in cash. For example, on the Moscow Commodity Exchange, futures deals account for over 90% of the total turnover.
Now in Russia, in the main, a stock market has already been formed, in which exchange trading in securities (shares, bonds, bills, certificates of deposit, etc.) of domestic enterprises is carried out. Securities are traded on the Russian Exchange. Moscow stock exchange. Moscow Central Stock Exchange. Central Russian Universal Exchange. Moscow Interbank Currency Exchange. Stock exchanges operate in several regions - St. Petersburg, Yekaterinburg, Novosibirsk, Vladivostok.