Perpetual bond. Securities Exit from perpetual bond

14.06.2024

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1. Provisions characterizing securities depending on the type of their underlying assets
Derivative financial instruments secure a set of property and non-property rights to any underlying assets
Securities comply with the definition of Art. 142 Civil Code of the Russian Federation
Primary securities secure rights to underlying assets, which do not include the securities themselves
Derivatives can secure rights to stocks and bonds
Secondary securities secure rights to any primary securities
Derivative financial instruments exist in the form of contracts and do not have the status of securities.

2. Perpetual securities include securities...
redeemable on sight
the period of which is not determined at the time of issue
maturity over 30 years

3. Provisions characterizing securities depending on the method of securing the rights of the owner in them.
Registered securities contain individual details of the owner and imply his identification for the exercise of the rights enshrined in them and the transfer of rights
Bearer securities must contain the details of the bearer of the security
Order securities assign rights to the person specified in them, who can exercise these rights himself or appoint another authorized person by his order
When issuing registered securities, mandatory maintenance of a register of their owners is required.
Bearer securities do not contain owner details and do not require maintaining a register of owners
Order securities can be issued as issue-grade

4. Future securities are securities...
paid within the next two days after the conclusion of the contract for their purchase
payment for which will be made at a certain time in the future
issued for a specific period
extinguishable

5. Provisions characterizing securities depending on their nationality.
National securities are issued only in the country of the issuer for its residents in the currency of this country
National securities are issued, as a rule, in the country of the issuer in the currency of this country for its residents
National securities and their issuer can only be in the jurisdiction of one country
Foreign securities are issued by the issuer of one country for placement in another country, their denomination is expressed, as a rule, in the currency of the country of placement
Foreign securities are issued by the issuer of one country for placement in another country, their denomination is expressed in the currency of the issuer
Foreign securities and their issuer can only be located in the jurisdiction of different countries
Euro papers are placed in several countries and are under the jurisdiction of all these countries at the same time
Euro securities are placed in several countries and are not under the jurisdiction of any of these countries

6. Provisions characterizing securities depending on the form of their issue and existence.
Issue-grade securities are placed in mass issues and within one issue secure an equal volume of rights, regardless of the time of their acquisition by the investor
Non-equity securities cannot be placed in mass issues
The status of an issue-grade security is fixed by law
Non-issue securities can only be issued in documentary form
Non-issue securities can be issued either in certificated or uncertificated form
Issue-grade securities can only be issued in book-entry form
Issue-grade securities can be issued either in documentary or uncertificated form

7. Provisions characterizing securities depending on the legal status of the issuer.
State and municipal securities are issued by government bodies of the Russian Federation or a constituent entity of the Russian Federation, as well as local government bodies
State and municipal securities can be both equity and debt
State and municipal securities can only be debt
Private securities can be issued by both corporations and individuals
Private securities can only be issued by corporations
Private securities can be debt or equity
Private securities can only be equity securities

8. Provisions characterizing securities depending on the possible purposes of their existence
Investment securities can generate income for their owner
Investment securities may not provide income to their owner
Trading securities can generate income for the owner if they secure rights to property assets
Trade-titled securities cannot secure rights to property assets
Non-investment securities can generate exchange rate income for the owner
Non-investment securities are not intended to provide current income to the owner

9. The liquidity of a security is its ability...
generate income
apply to the market
can be bought and sold quickly and at minimal cost at the equilibrium market price.

10. Securitization is...
protection of securities from counterfeiting
issue of securities secured by any assets
investor protection from interest rate risk

11. Provisions characterizing equity securities.
Issue-grade securities can be issued as registered uncertificated
Issue-grade securities can be issued as certified bearer securities
Issue-grade securities can be issued as registered documentary
Issue-grade securities can be issued as uncertificated bearer securities
The rights secured by uncertificated issue-grade securities are listed in the security certificate and in the decision to issue
The rights secured by uncertificated issue-grade securities are listed only in the decision on the issue
The rights secured by documentary bearer securities are listed in the security certificate and in the decision to issue
The rights secured by documentary bearer securities are listed only in the security certificate

12. Provisions characterizing securities depending on the form of investing investors’ funds in them
Equity securities have liability content
Debt securities reflect the debt of the issuer to the investor
Equity securities reflect the owner’s participation in the formation of the authorized capital of an enterprise or a common property complex
Debt securities secure the owner's right to participate in the distribution of the issuer's profits
Debt securities have the properties of repayment, maturity and payment of the underlying asset
Equity securities secure the owner’s right to participate in the distribution of remaining property upon liquidation of the investment object

13. Provisions characterizing the legal features of securities
To exercise the rights enshrined in a security, proof of the right to the security itself is required.
A security can be certified by any set of rights determined by the issuer
Securities certify subjective rights
Any document that meets the definition of Art. 142 Civil Code of the Russian Federation
The status of securities is secured by regulatory legal acts of authorized state bodies
The owner of a security has the opportunity to alienate part of the rights enshrined in the security
The rights secured in securities are circulated only together with the right to the security itself

14. Provisions characterizing the economic features of securities.
Tradability – the possibility of civil circulation of securities – is determined by the needs of securities market participants
The negotiability of securities is determined by legal regulations on the part of the state
Liquidity is the ability to quickly and at minimal cost buy or sell securities at the equilibrium market price
The liquidity of securities is determined by the market and does not depend on negotiability
The reliability of securities is determined by the risk of loss of invested funds
Current yield cannot be negative
Exchange rate return cannot be negative
Total return can be positive, zero or negative

15. Rights certified by securities may belong to...
bearer of the security
person named in the security
organization carrying out trust management of securities
the person named in the security, who can exercise these rights himself or appoint another person by his order

Perpetual securities are those documents that do not have a maturity date. This financial instrument is widely used in the stock market. This type of securities includes bonds.

Interest (income) on these financial instruments is paid forever, but the specific thing is that the initially borrowed amount is never paid to the holder. Also, such a security is considered perpetual if the owner has the right, but not the obligation, to repay such security.

Peculiarities

Such a perpetual security is profitable and, according to most investors, fun to work with. Most traders are accustomed to the fact that bonds have:

repayment terms;
fixed rate and after a certain time;
the holder may receive a return of the face value.

But perpetual securities have completely different characteristics.

A bond with perpetual status, by definition, does not have a period during which the issuer must return the profit, and the investor has the right to receive income. In some cases, such securities may be subject to forced redemption. A lot of existing issuers apply such measures and approve a 7- or 10-year repayment period.

In the system of ordering the Central Banks, they can be placed next to those that have a long term and have a privileged status. And this is completely justified. Thus, the issuer of the mentioned shares has no obligation to return the amount of investment to the holder. From a different position, the owner of a perpetual term has every right to count on dividends that will not depend on the success of the company. The issuer may even incur losses, but must pay the obligations according to the level specified in the document.

It is beneficial for banks to issue such financial instruments, since they can use the resulting profit to any level of capital.

Story

For a complete understanding, it is worth turning to the origins of such securities. They appeared in England in 1753 year. The first permanent bond in the United Kingdom was called the British Console. At that time, their profit was approximately 2.5% per year. Since the beginning of the 20th century, income can be obtained upon first request; for this, only a corresponding resolution from parliament is required. Over the years, many countries took the example of the progenitor of such bonds and began to actively issue them. For example, such giants as IBM, Walt Disney and Coca-Cola in the mid-90s issued centenary bonds, those who then bought them now in “chocolate”.

If we talk about domestic perpetual bonds, they appeared on the financial market not so long ago. The first one was released by VTB Bank in 2012, and then many giants began to issue similar financial market instruments. Domestic bonds have the great advantage of having high interest rates. In the future, it is likely that they will decline, but for now they can bring good profits to their owners. The danger of such securities, as well as other valuable documents, is the risk of non-payment of their nominal value in the event of liquidation and bankruptcy of the issuer.

Expediency of existence

Recently, perpetual bonds began to be issued in book-entry form. They are recorded in special registers. Both holders and issuers liked this simplification. This makes it easier to control the turnover of the Central Bank. But at the same time, the owner of such a document has every right to submit an application and receive a paper equivalent.

Any transaction with book-entry perpetual bonds:

must be certified by the person who recorded the rights. The same authorized person is obliged to record the grant or restriction of rights;
the person is fully responsible for ensuring confidentiality, makes entries in official registers and monitors the accuracy of the data provided;

In economically developed countries, perpetual bonds are issued in large volumes. Issuers can be large enterprises, corporations and the state.

Profitability

The main goal of the investor is to receive income as a result of investing funds. It is possible and necessary to calculate it for perpetual bonds, since it brings stable profits. The source of income is dividends, the so-called coupon payments, which have a fairly high level. This is a kind of perpetual annuity. To determine profitability you need to have the following data:

annual coupon rate;
denomination;
price;
exchange rate.

If everything is clear with the first three points, and the market value is the price that formed in the market at the time of sale. This indicator is significantly influenced by the popularity of the issuer company and the number of bonds purchased.

The calculation formula for this method can be described as multiplying the annual rate by the face value and dividing by the price, or dividing the annual rate by the market value and multiplying by 100.

Important: this method can be used for other types of securities, but only in this case there is a stable payment of profit for them.

Price

The mathematical expression for the cost of perpetual securities can be calculated as a period that is equal to infinity, precisely for this reason, the cost of such payments tends to zero. As a result, the current price of bonds is calculated using the formula: P=i/y, where i is the coupon rate, y is the yield on the longest-term financial instrument. This is why such bonds are super profitable at low interest rates.

Be careful! Such bonds may have a pitfall; investors should be wary of the volatility of such securities. Perpetual bonds react sharply to fluctuations in interest rates. It is advisable to invest in them if a sharp reduction in rates is expected, in which case the value of the securities will increase, which means that the investor will be able to make a high profit by selling them.

It is also worth investing if there is a goal to exchange capital for “risk-free” financial instruments that have a long investment period.

Please note that perpetual bonds have absolutely no protection against traditional risks in the financial market. Even the largest issuers, such as the British government and state-owned banks, fell under the restructuring of such valuable documents.

The most widespread on stock exchanges and markets are perpetual securities. These include obligations of the established form, which have all the necessary details with the help of which financial or other type of property is certified. Perpetual securities can be in circulation until their maturity or forever. Such securities include private and government bonds and loans.

The income of the owners of perpetual bonds is repaid throughout the entire period of their validity. Including forever. In addition, perpetual bonds include those for which borrower has only rights, but not obligations to repay them. An example is English consoles.

Book-entry securities

Nowadays, many bonds are moving from paper to paperless form. Owners of such papers can receive a paper sample upon their first request.

All transactions carried out with book-entry bonds must be approved by the person who records the rights. It also records the granting or restriction of rights, as well as the transfer of such papers. He bears full responsibility for undocumented papers, ensures confidentiality, makes official records and controls the correctness of the data provided.

Example of a perpetual bond

In the late 90s of the 20th century, IBM issued century-old securities worth almost a billion dollars. This company was one of the twenty organizations that issued similar bonds for such a large amount. Their rate was more than 7%. Their rate, in contrast to securities for a period of 30 years, is 80% higher. Organizations that have issued century-old securities include Walt Disney, Coca Cola and other world-class companies.

Types of perpetual bonds

Perpetual bonds are divided into bearer and registered, primary and secondary. If a registered security is transferred to another person, it becomes an order security.

Securities, according to Russian legislation, include the following:

1. Bills of exchange.

2. Checks.

3. Government bonds.

4. Certificates of deposit.

5. Bill of lading.

6. Investment share.

7. Marketable securities.

8. Non-government securities.

9. Non-marketable securities.

Let's take a closer look at these securities

Promotion– gives its owner the right to receive part of the income of the joint-stock company of which he is a member. As well as his share of the property that is due to him after the liquidation of the company.

A check is a type of security issued by a bank and specifies the amount of money and its validity period. A check is a type of bill of exchange that can only be issued by a bank.

Government bond - refers to securities that give its owner the right to receive, within a specified period of time, the percentage of the property equivalent or its value specified in it. It serves as an obligation of the state to return its value on the terms and within the period that suits the bond owner.

Bill of exchange is a bond that certifies in writing the financial obligations of the debtor regarding the need to repay the existing debt. The circulation and type of bill of exchange is regulated in accordance with the rules of bill of exchange law.

There are two types of bills:

1. A bill of exchange is one of the types of bonds that offers a person who has a debt to pay it within a specified period.

2. A promissory note is a security that obliges the debtor to return the borrowed funds after a certain period of time.

A certificate of deposit is a bond that has free circulation and indicates the presence of a cash deposit. For individuals - savings, and for legal entities - deposit. The certificate indicates the bank's guarantee that the deposit will be returned within the specified period.

A bill of lading is an international document indicating the transportation of any cargo.

Investment share - a personal document that indicates the share of its owner in possession any property. This is what constitutes a mutual investment.

Market bonds are free to sell or buy on the market.

Non-government bonds are created by non-governmental organizations (banks, companies, organizations) or individuals.

Non-marketable bonds - belong to the category of securities that cannot be sold to anyone except the organization or individual that issued them.

All these types of securities are freely circulated in any state with a developed economy and a well-developed banking system. Many of these bonds are perpetual.

The Civil Code of the Russian Federation establishes the following types of securities.

Government bond;

Bond;

Bill of exchange;

Certificate of Deposit;

Bank certificate;

Bank savings book to bearer;

Bill of lading;

Privatization securities.

Double warehouse receipt;

Warehouse receipt as part of a double certificate;

Certificate of pledge (warrant) as part of a double certificate;

Simple warehouse receipt.

Federal Law of July 16, 1998 No. 102 - Federal Law “On Mortgage (Pledge of Real Estate)” allows the issue of:

Mortgage.

Federal Law of November 29, 2001 No. 156 - Federal Law “On Investment Funds” allows the issue of:

Investment share.

Federal Law of December 28, 2002 No. 185 - Federal Law “On the Securities Market” allows the issue of:

Issuer option.

Federal Law dated November 11, 2003 No. 152 - Federal Law “On Mortgage Securities” allows the issue of:

Mortgage-backed bonds;

Mortgage participation certificate.

Classification of securities is their division into pairs - opposite types according to some legal and economic criteria.

Fixed-term and perpetual securities. According to their lifespan, securities are divided into:

-urgent– these are securities, the life of which is limited in time according to the terms of their issue. Most issued securities have predetermined maturity dates.

-unlimited– these are securities for which there are no time restrictions established by the terms of their issue. The classic type of perpetual securities are shares. The perpetuity of a security means that the payment of net income on it has no time restrictions, and the terms and methods of its redemption are not known in advance.

Future securities, as securities that have a fixed maturity, are usually divided into three types:

-short-term– securities with a circulation period of up to 1 year;

-medium term– securities with a circulation period of more than 1 year within the range of 5–10 years;

-long-term– securities with a circulation period usually exceeding 10 years.

Perpetual securities can exist in two varieties:

As securities, the life of which is determined by the life of the issuer (share);

As securities, the circulation period of which, when issued, is regulated only by the procedure and conditions of their cancellation (redemption). (perpetual stock options).

Documentary and uncertificated securities. According to the legal form of existence, securities are divided into:

-documentary– these are securities issued in the form of a document;

-undocumented– these are securities that exist in the form of records on tangible (computer, electronic) media, the procedure for the implementation of which is regulated by the state.

From the point of view of their legal form, Russian securities are divided into two groups:

Securities that can only be issued in documentary form. These include bills of exchange, checks, warehouse receipts, bills of lading, etc.;

Securities that can be issued in both documentary and uncertificated forms. These are mainly stocks and bonds.

Emission and non-emission securities. According to the form of issue, securities differ into:

- emission– these are securities put into circulation in issues (usually in large quantities), within which all securities are absolutely identical, and each issue is subject to mandatory state registration. The main types of such securities are stocks and bonds;

- non-emission– these are securities, the issues of which are not subject to mandatory state registration. Typically these are securities issued individually or in small quantities, but not necessarily.

The division of securities into issue-grade and non-issue-grade securities is theoretically based on the fact that, firstly, issue-grade securities should usually include the most important securities for the market, i.e. representing capital, and secondly, produced in large quantities, i.e. affecting the interests of a fairly large circle of market participants.

Bearer and registered securities. According to ownership (form of ownership), a security can be:

-bearer, or a bearer security, the rights to which belong to its bearer;

-nominal- this is a security, the rights to which belong to the person named in it.

A registered security, in turn, depending on the method of transferring rights under it, is divided into two legal subtypes:

A simple registered security is transferred by assignment.

Order security – transferred by endorsement.

Assignment and endorsement are two forms of assignment of the rights of the creditor or, in this case, the rights of the owner of the security. An assignment is a bilateral transaction, or agreement, between the old and new owner of a security. In the case where the assignment of rights is carried out for money, the assignment agreement takes the form of a purchase and sale agreement. Endorsement is a one-sided transaction, i.e. an order in accordance with which the previous owner of a security appoints a new owner.

Government and corporate (non-government) securities. According to the legal type of the issuer, securities are divided into:

-state - These are securities the issuer of which is the state represented by its authorized bodies.

-corporate (non-state) - these are securities whose issuers are commercial organizations.

National and foreign securities. According to nationality, securities are divided into:

-national ( Russian ) – these are securities issued by national issuers;

-foreign – These are securities issued by foreign issuers.

Risky and risk-free securities. According to the level of risk, securities can be divided into:

-risk-free– these are securities that have the lowest possible (maximum) level of risk in market conditions;

-risky – These are securities whose level of risk exceeds the level of risk associated with risk-free securities. Risky securities, in turn, are conditionally divided into three groups: low-risk, risky, high-risk.

In global practice, risk-free securities include short-term government debt obligations. All other securities are considered risky. Low-risk securities usually include other government securities, medium-risk securities usually include corporate bonds, and high-risk securities usually include stocks.

Marketable and non-marketable securities. From the point of view of the degree of freedom of circulation, i.e. the presence or absence of restrictions on purchase and sale, securities can be divided into:

-market - these are securities that have complete freedom of circulation, due to which they can also be called freely tradable securities;

-non-market - these are securities that have restrictions or prohibitions on transfer through purchase and sale.

Equity, debt and trust securities. Both in economic classification and from the point of view of the legal affiliation of the attracted capital, securities are divided into:

-share (ownership) – these are securities that represent the issuer’s own (authorized) capital;

-debt - these are securities that represent borrowed capital for their issuer;

- fiduciary– these are securities representing capital held in trust.

Income and non-income securities. From the point of view of the availability of income under certain conditions of issue, securities can be classified into:

-income- these are securities, the income for which is already included in the issue itself, and it is paid by the issuer to their owner. Income-bearing securities are divided into interest-bearing and discount.

- unincome– these are securities for which the issuer does not pay any income to the issuer.

Investment and non-investment securities. Depending on the quality in which the security is traded on the market, it can be:

-investment (capital) is a security that brings investment income to its owner. Investment securities include stocks and bonds.

-non-investment is a security whose circulation on the market does not bring income to its owner. Typically, such securities include settlement securities (bills of lading, warehouse receipts, checks).

Nominated and unnominated securities. Depending on the availability of face value, securities are divided into:

-nominated– these are securities that have a par value, or face value, in monetary terms;

-unnominated- These are securities that have no par value.

According to Russian law, investment securities must have a par value.

Securities are classified according to many criteria. Based on their lifespan, a distinction is made between perpetual and fixed-term securities. Perpetual securities cease circulation only in the event of liquidation of the issuer. Typical examples are stocks and investment units.

Term securities have a period of existence limited by the period of time between the moments of issue (issue) and redemption. Based on their maturity, securities are divided into short-, medium- and long-term, and the specific criteria for classifying financial instruments into one of these groups depend on the type of security and the specifics of the legislation of each country.

By issuer, securities are grouped as government and corporate.

Government securities can be issued by government authorities, government organizations, and central banks.

Corporate securities are issued by business entities - enterprises of various forms of ownership and organizational and legal forms. These can be business societies (OJSC, CJSC, LLC, ALC), unitary enterprises, production cooperatives.

According to the terms of issue, there are emission and non-emission securities.

Issue-grade securities are issued during the issuance process subject to the mandatory sequential implementation by law of the stages of the issue and are characterized by the following features:

· posted in releases;
· within the framework of one issue, they have equal volumes and terms for the exercise of rights, regardless of the time of their acquisition.

Issue-grade securities include shares, bonds, and investment shares.

Non-issue securities are issued for circulation without an issue procedure; each of them has an individual set of rights and may differ in terms of circulation period, profitability, etc. Non-equity securities include bills of exchange, bank certificates, warehouse receipts, mortgages, etc.

According to the form of issue, securities are divided into documentary and uncertificated and uncertificated.

Documentary - issued in paper form in the form of forms.

Undocumented - exist in the form of entries in accounts.

According to their functional purpose, securities are classified into debt, commodity distribution, payment and collateral.

Debt securities are issued to attract resources and generate borrowed capital. This group includes bonds and bank certificates.

Equity securities are shares, investment units, with the help of which the company's equity capital is formed.

Distribution documents are necessary to maintain commodity turnover. They confirm the fact of acceptance of goods for storage or acceptance of cargo for transportation and serve as an additional guarantee of their safety during storage or transportation. Such securities include a warehouse receipt and a bill of lading.

Payment securities are issued to ensure convenience of payments (checks, checkbooks).

Pledged securities act as the subject of collateral (mortgages).

Some securities are capable of performing several of these functions at once. Thus, a bill of exchange can be simultaneously used as a debt, payment and collateral instrument, and in addition - an instrument for providing a loan; a bond, which is essentially a debt instrument, can also act as collateral.

Registered securities contain the name of the owner.

Their type is order securities, which can be transferred by the owner to another person by making an endorsement - endorsements.

Bearer documents are securities that do not contain the owner’s name and are issued only in documentary form, since the non-documentary form involves recording the owner’s name on special accounts.

Based on the presence (type) of income, securities are differentiated into profitable and non-income.

Income securities have investment properties and provide income. According to the order of payment of income, they are divided into discount (the owner receives income in the form of the difference (discount) between the redemption price and the acquisition price) and interest (income is paid as a percentage of the nominal value). A type of the latter are securities with periodic interest payments (coupon). Moreover, the interest rate of such bonds can be fixed or floating.

Non-income securities do not have investment properties: they are issued to service commodity or payment turnover, so generating income is not the purpose of their acquisition. Non-income securities include checks, warehouse receipts, and bills of lading.