The stock market of Russia and Italy: dynamics of development and comparative characteristics

THEME: «THE STOCK MARKET OF RUSSIA AND ITALY: DYNAMICS OF DEVELOPMENT AND COMPARATIVE CHARACTERISTICS»

CONTENTS

• INTRODUCTION 3
• CHAPTER 1. THE STOCK MARKET AND ECONOMIC GROWTH: THEORETICAL AND ANALYTICAL QUESTIONS 7
• 1.1 Theory of stock market 7
• 1.2 Strategy and data 12
• 1.3 Structure, transactions and rules 20
• CONCLUSION 28
• CHAPTER 2. THE STOCK MARKET OF RUSSIA AND ITALY: DYNAMICS OF DEVELOPMENT AND COMPARATIVE ANALYSIS 31
• 2.1 Russian stock market: the development and current state 31
• 2.2 Stock market in Italy: development and quality of institutions 43
• 2.3 Interaction and prospects 51
• CONCLUSION 54
• LIST OF LITERATURE 56
• Appendix 1 61
• Appendix 2 72
• INTRODUCTION
• Theoretical aspects about stock market in native scientific papers up to 90-th were mainly based on the Marxist tradition, which interprets the securities as a certain kind of fictitious capital, as without value, they can be bought and sold on the stock exchange at a priceshaving irrational character.
• There is a weakening of traditional literature in the Soviet criticism of fictitious capitalin scientific studies 90-th and later periods. The stock market is interpreted as a kind of tool for mobilizing funds for a variety of development and passes through the prism of the basic categories of political economy: capital and fictitious capital.
• The stock market is an integral part of the securities market, where it sells a specific commodity — financial securities. It is considered that this is one of the most faithful of definitions, which gives a complete idea ofwhat is the stock market. Many authors sharethis opinion, believing that the stock market is a broader concept than the category of the stock market, as the latter includes not all securities, but only the value of the stock, that is, investment securities.
• Lack development of informational opennessis characterized by indicators such as the level of information transparency of companies, educationand awareness to private investors. The efficient operation of the stock market requires that the disclosure requirements of international standards. It should be noted that, for example, in Russia there are no legal requirements for the disclosure of the consolidated financial statement of companies, their transparency according with international accounting standards.
• As resultit need to pursue an economic policy aimed at increasing the transparency of the ownership structure, necessary for both Russian and foreign investors, which is a definite indicator of reliability. Without a solution to these problems is difficult to talk about improving confidence of investors, a tributary of the necessary investment resources.
• At the step of virtualization and the latest technology, a real economic growth of economy is impossible without the development of innovation and investment, bearing in mind, first of all investments in the renewal of fixed capital, based on technological innovation.
• The successful functioning of the stock market and its role in the modern economy, entail new requirements for the stock market to the liquidity of capital, risk management and control operations. The world economy is actively occurring processes of technological re-equipment of the stock markets based on internet technology, erasing national borders and actively contribute to strengthening direct links between investors and issuers in various countries.
• The stock market is not only one of the factors of economic policy, but also a certain kind of cumulative element that combines a number of economic trends. The development of technology, the growth of labor productivity and savings rates are the sources of economic growth, but all of these factors lead to an increase in the stock sector.
• It only took a decade to the stock markets of countries with growing economies have become key sources of funding for their enterprises. It claims to be quite the most important changes in international finance over the last ten years. However, does it lead to rapid economic growth to a higher efficiency of investments in stocks? And. whether or not do today’s investors seek to invest all assets in the shares of companies with fast-growing economies?
• For the participants of the stock market results of the study will evaluate the effectiveness of their investment strategies, and for regulatory authority is allowedto determine the current state of the market and develop an action plan for its reform. From a theoretical point of view, the analysis of the efficiency of the stock market expands understanding of the mechanism of operation and the process of price formation in securities markets, to determine the significance of the market for long-term growth of the economy.
• We used the researches of European economists who study the problem of the stock market: G. Aleksandepa, D. Bipca, U. Baumolya, D. Beyli, M. Jonka, D. Douda, J. Gitmana, G. Mapkovitsa, F. Modiliani, D. Stiglitz, U. Sharpa and others.
• While the development of the concept of the stock market it is used a systematic procedure. In this approach, it is applied such scientific methods: historical-genetic, comparative, systemic-functional, economic-statistics. On this base, a systematic approach practiced holistic political-economic study of the essence of the stock market, its place and role in the modern market economy, formulated problems to be theoretical solutions.
• The purpose of this research is that, on the basis of theoretical analysis of market efficiency hypothesis to determine the possibility of its use in the simulation of processes occurring in the securities markets, to assess the current state of the stock markets and establish a relationship between the degree of market efficiency and the factors that contribute to long-term growth of the economy.
• According to this purpose, it has the following tasks:
• — to analyze the hypothesis of stock market efficiency;
• — to classify the degree of efficiency of the stock market and characterize each of them, to identify the relevant stock markets of different countries, the major forms of the efficient market hypothesis;
• — to determine the use of the main provisions of the hypothesis of market efficiency when modeling the behavior of prices in the securities markets of developed and developing countries;
• — to identify ways of improving the efficiency hypothesis stock market better reflect real-life situations that occur in the securities markets;
• — to analyze the mechanism of the effect of the financial market on the efficient allocation of resources in the economy and to define the specific role of stock market prices in the process;
• — to highlight the relationship between the efficiency of the stock market with the main factors through which the securities market impact on economic growth;
• — to analyze the impact of institutional investors on the development of the stock market and the degree of its effectiveness.
• The object of the study is the stock markets of developed, developing and transformation economies. The subject of the study is the relationship between the participants of the securities market and their specific manifestations ye the transition economies as a defining elements of the functioning of the financial market.
• stock market economic financial
• CHAPTER 1. THE STOCK MARKET AND ECONOMIC GROWTH: THEORETICAL AND ANALYTICAL QUESTIONS

1.1 Theory of stock market

The National Securities and Stock Market State Commissionhas approved a draft concept of disclosure in the stock market. This decision was taken at a regulation meeting on 26 April 2012. Among the basic principles on which the information should be disclosed in the stock market are timeliness, accuracy and completeness, and the free access to information, as well as subjects of interest disclosure to improve transparency, user-friendly and avoid insider.

The concept is appealed to standardize the requirements as to the scope, timing, content disclosed by one party to the stock market from different sources, as well as lead to a common process of disclosure and the format of submission, software, etc. There are among the objectives of the document are creation of a single information center that accumulates all the disclosed information on the stock market. This document was developed by the Commission in accordance with the existing requirements on transparency of corporate activities.

The economic researches are identified two points of view about the importance of the financial system for the economy as a whole and for its economic growth in particular. The followers of the first concept consider that the financial market does not play important role in economic development. For example, J. Robinc argues that the financial market is not stimulatedof economic growth, and its development is only response to the expansion of the real economy. In his review of the theory of economic development of H. Stern does not even mention the financial market as a factor contributing to economic growth. In the works of the first researchers of theories of economic development, including Nobel laureates, it is argued that the financial system plays a minor role in economic development. Moreover, one of them, R. Lukac argues that economists often exaggerate the role of financial factors in economic development.

In contrast to the first, a larger number of economists are of the view that emphasizes the importance of the financial system to promote economic development. W. Bagehot, J. Shumpetep, R. Kemep, R. ldsmit give conceptual explanations and empirical examples of the positive impact of the financial system on economic growth. Based on these assumptions, A. Gelb, A. Ghani, J. DeGregand P. Giudotti show that the value of capital market development is closely correlated with economic growth in a large sample of countries. The result of these studies is that a well-functioning financial market is a key element to sustain economic growth.

P. King, P. Levin, T. Beck, and H. Loyza provide empirical evidence to support the view that financial development causes economic growth at the country level. At the sectoral level, P. Padzhan and L. Zingales show that industry-funded from external sources, is growing faster in financially developed countries. At the industry level A. Demnrguk-Kant and B. Maksimovich, using its own model to estimate the level of growth in the absence of external funding, believe that the firm’s financial and developed countries are growing faster than predicted by their model.

In the researches, J. Dzhayaratne, P. Ctrahan, J. Greenwood and B. Jovanovic also confirm that the main source through which financial market has a positive impact on economic growth, improve the quality of resource allocation in the economy. J. Vurgler proves that developed financial markets, measured as the value of the domestic stock market and credit markets relative to GDP, and improve resource allocation.

Based on the concepts ofcontent and nature of economic growth, it follows that economic growth is regarded by scholars as the results of a quantitative increase in the functioning of the economy. It is associated with increasing material abundance, the ability of the economy to better meet existing and other needs, solve other social and economic problems. In our view, economic growth, in addition, must reflect the qualitative improvement of existing production capacities through innovation, which also gives an increase in the actual volume of production.

At the present level of development, economic growth is based on the use of knowledge and information flows. The introduction of new technologies makes it possible to overcome the crisis and depression, creating new manufacturing capabilities, provides a transition to sustainable economic growth.

Currently, the major industrialized countries are becoming the «new economy», which is due to the changing economic role of innovation, growth and enablers of innovation processes, which is called innovation.

First innovation economy appeared in the U.S. in 1956. The scientific concept is based on the idea of waves-type society. The First Wave is the result of the agrarian revolution; the Second Wave is the result of the industrial revolution. The Third Wave is the result of intellectual revolution, corresponding to a post-industrial society. The Third Wave is based on the «demassification» tendencies of failure of the economy of mass production and mass marketing, mass media and mass distribution homogeneity. The result of a process demassification is the transition from mass production to a greater individualization of products, from mass marketing to micromarketing and the formation of niches, from a monolithic hierarchical control organization to decentralized networks. At this level, the economic growth is due to the leading role of innovation. That innovation is the renewal and expansion of the relevant markets, changes in management, the organization and working conditions.

To manage the innovation economy is important that the system will only be open innovation, where their development will be a condition of its preservation to innovative momentum was caused by the system itself.

For this purpose, necessary to develop innovative investment strategy, which will be caused by close functional relationship of innovation and investment in the stage of investment in intangible assets.

Innovative-investment strategy is a strategy that provides all the basic directions of development of the enterprise innovation and investment relations, through the application of scientific principles of long-term innovation and investment objectives, selecting the most effective ways to achieve them, the timely adjustment directions of formation and use of investment resources in the changing conditions of the external environment. This strategy is designed to ensure the functioning of the innovation system creates, as well as contributing to the maintenance and improvement of quality of goods, services, technology, and management processes at the macro — and micro — levels by means of efficient investment.

The stock market is a determining factor in the formation of investment — innovative model of economic growth. A significant interest is the interaction of the stock market for the national economy and the real economy and the role that it plays in it. Between the stock market and the real production process, there are some obvious connections. Technology development and material production create the preconditions for the emergence of the stock market. The labor productivity growth in the real sector frees up labor resources, which are used in the financial sector. The accumulation of a certain «critical» value of the value created in the production of goods, it is possible the emergence of debt. Further development of heavy industry makes this a natural process. The sources of growth in the real sector and the stock market in this case are the same.

Without the development of the stock market in the form of a vital sector of the market economy, and the real effective mechanism to attract funds of domestic and foreign investors in the country’s economy can’t be a transition to a new model of socio-economic development and the formation of an innovative type of reproduction. All this, in turn, requires appropriate investment, structural, industrial, scientific, technical, price and other components of the socio-economic development.

The impact of economic growth on the change in the reproductive mechanism is madeby means of strengthening the role of the stock market in the redistribution of financial resources. The stock market is segment of the financial market and the element of economic policy, which allows us to solve a variety of macro-economic issues including: the growth of the concentration and the socialization of production, mobilization of available funds and the distribution of these funds in the right segments of the economic system, activation of the investment process, the transformation of savings businesses and the public investment resources, increasing the income capitalization of market agents, the formation of involvement of each household in market conditions and the economic transformation of the private ownership of a wide range of market agents in the capital, generates revenue. The main purpose of the stock market is to provide a mechanism for attracting investments into the economy by redistributing financial resources from industries with their abundance in the industry, where they tested negative. Consequently, created a system through which borrowers can raise funds from new sources in a volume much larger than the size of loans, and investors receive an unlimited variety of financial assets by investing in which they are paid.

As the organic segment of the financial market, the stock market at the same time contributes to the successful implementation of the economic functions of the state the following: creation of a single economic space, helps to identify priority areas for investment financing of certain sectors and industries, to encourage the competitiveness of some sectors of the economy and restrict others to distribute and reduce the economic and investment risks between investors and business entities.

In addition, the stock market in government can also act as a carrier of market ideology, which implies a broad liberalization of the economy, and as a social institution that is capable of saving the capitalization of businesses and people, turning them into investments.

In effective and functioning model of the stock market is closely linked to economic growth through the so-called «accelerator principle», the essence of which is that the dynamics of the stock market given the growth in output and GDP. In turn, the increase in the market value of the shares and capitalization allows companies to raise additional funds in the form of securities issuance and bank loans. In the event that the funds are real investments that is directed to the acquisition of fixed assets and working capital, it provides an additional increase in production and GDP. In this regard, a long stock market meant free capital where collected and concentrated savings, which are then sent in the industry, where they are immobilized for a long period.

1.2 Strategy and data

It is distinguished financial, monetary, credit and stock markets, as well as the capital market.

The widest margin is the financial market, ie a market in which goods as are:

• cash, including foreign currency;

• bank loans;

• securities.

Based on the commodity structure of the market, it is divided into the money market and capital market, and the latter, in turn, is divided into credit and stock markets. Thus, the stock market is called a market where securities are traded.

The main types of securities:

Bonds are debenture stocks proving that one person (the creditor) has provided another person (the debtor) a certain amount of money with a fixed return policy. Bonds are a type of government loans. Bond yields are usually determined by the amount paid per cent annually.

Sharesare securities that certify the right of the owner to share ownership of equity, including the right to participate in government by voting and the right to receive dividends from its profits.

Futuresare contracts for future delivery, that is, the seller’s obligation (the issuer) to the buyer (investor) for the supply of a certain time and place certain amount of goods at fixed price previously.

Optionsare derivative contracts which give their holders the right to buy or sell a specified quantity of goods at a fixed price at a certain time (European option) or up to this point (American option).

The participants of stock market:

• issuers, i.e.organizations issuing securities;

• investors, i.e. legal and natural persons investing in securities;

• intermediaries, providing for promotion of securities from issuers to investors.

Let’s involve on the Russian securities market. Currently, it has already reached a level of development at which the investment performance is largely determined by the quality of the fullness of soup analytical work. This applies in particular to the market Government Short-Term Bondsand Official Federal Loan Bond in the period before the August crisis, the extent of which at the time was not commensurate with the amount of emissions of other types of securities. Now more successfully formed the market for corporate securities.

Used to practice techniques and methods of stock markets can be grouped into two main groups, complement each other and, at the same time, based on a fundamentally different approaches.

The first group includes methods of fundamental analysis, which suggests a qualitative study of both internal and external factors affecting the market in general and specific investment. Such factors include the political situation, economy-wide processes, financial position and other issuers.

The second group comprises methods of technical analysis based on large amounts of statistical information and analysis of possible scenarios involving market development, modeling and dynamics of the relationship, the analysis of trends and variability. The use of these methods is possible only if a well-developed technical and information base.

Both approaches are aimed at solving the same problem, to determine the direction of future price movements. In this case, the fundamental analysis studies the causes that drive the market, the object of study of technical analysis are only the effects these causes.

The basic principles of technical analysis of the financial market are:

— principle of reflection;

— principle of the trend;

— principle of repetition.

The essence of the principle of reflection is that exposure to this asset investment policy, macro-economic, social, psychological and internal factors affect the volume of supply and demand, which ultimately form the price of the asset. The investor is most interested in is the end result, i.e. price, so a detailed qualitative analysis of the factors themselves (balance sheets, statements of income, sectorial indices, etc.) in most cases can be presented irrelevant or inappropriate.

In accordance with the principle of trend trends in demand and supply, determine the basic direction of the price of the asset is described by the trend. At some points on the wound may be momentary difficulties in prices, but as long as the net effect of all factors does not change the basic trend of the dynamics also remains the same. However, with the passage of time, the quantitative changes in the determinants develop into quality and it is the birth of a new trend.

Under the principle of repetition all the events taking place in the market with some likely to be repeated in the future. The accumulation of experience and preparation into separate model allows us to interpret the current situation similar situation and predict their development. At the same time, though, it is necessary to take into account that other market participants also accumulate this information and can’t repeat the mistakes committed earlier. In connection with this unacceptable situation, blind imitation, it is necessary to anticipate changes in the actions of all stakeholders.

To study the movement of the market in technical analysis uses three main types of information, or three indicators: price, volume of trade and open interest.

The price can act as the real price of goods in the markets and the value of currency and other indexes. This indicator is mainly for two reasons: first, it is much closer to the ultimate goal of technical analysis — predicting future prices, and second, the most available to any market.

Under the volume of trade means the total amount of contracts over a certain period. This indicator is not always clearly defined in all markets, and not all methods are adapted for it.

Open interest is the number of positions are not closed at the end of the trading day. This indicator is in order of importance in third place.

The complexity of the content of the securities market and the steady increase in its functional role, the sharpness of the contradictions of formation of this segment of the financial market led to insufficient development of theoretical and methodological problems in the functioning of the stock market.

Now many aspects of the performance of the stock market to be different theoretical interpretations. It is, first, concerns the specific relations in the operation of the stock market, its relationship with the real sector of the economy, economic properties of the securities as objects of sale, market functions, forms and methods of management, etc.

Of particular importance is the value of contradictions in the development of the stock market. The formation of a truly scientific understanding of the securities market prevents the widely used fit of external and formal manifestation of the stock market under the classic designs of the West, which identifies often the mere appearance of a new economic structure with similar structures of the western economy. This approach ignores the evolving nature of the formation of the stock market of Western countries, which have deep and meaningful inner logic of development.

It continues to be a lot like the controversial and poorly developed regulations, and outstanding problems. There is not enough clarity and justification of the economic fundamentals of the stock market. The direct use of the experience of action the stock markets of the developed market economies without critical analysis and assessment of the real state of the Russian economy has not produced the desired results, largely adverse consequences. In practice, there is a certain gap between the theory and the actual development of the stock market, which is largely responsible for the separation of the securities market from its initial and primary functionality — the transformation mechanism of monetary savings of the population and enterprises in investment. The individual market sectors, the elements of its infrastructure, regulations, and performance standards developed unevenly, leading to the emergence of negative factors in its development.

The ambiguity of the answers to many of the theoretical problems of the stock market, the complexity and contradictions of the process of formation, the institutional imbalance and lack of effectiveness of his work requires a deeper theoretical understanding of the problems of the securities market, to strengthen research on each and every aspect of its operation, including the problem of regulation of the totality of the relations developing between participants in the stock market.

The initial data for the primary selection of the assets are the objective facts of the formal status of the investor, the extent of its resources, the alleged urgency of investing, as well as the existing assets in the financial markets and how investors access to the operations of the assets. Implementation of the second selection requires the formalization of subjective preferences of the investor in respect of investment objects.

Fig. 1. The techniques that are the foundation of modeling portfolio within an integrated multi-factor portfolio theory

The procedure for pre-segmentation of the portfolio, which assumes the division of total resources invested in certain proportions between several types of assets (such as between stocks and bonds), is optional. However, this segmentation can significantly simplify the procedure further detail the structure of the portfolio, because of the diversification within each sub-portfolios need to conduct a comparative analysis of the Raman and the only similar assets.

The module combination (diversification) portfolio is the key to a number of procedures and algorithms of portfolio theory: it allows you to choose the best from the point of view of the investor mix of investment assets across the portfolio or individual sub-portfolios if appropriate segmentation was performed.

Assessment of the investment portfolios of assets and qualities, from the point of view of portfolio theory support element providing the bulk of the input data for the optimization procedure of the portfolio. However, it is this element of most complicated for formalizing and to interpret test results.

Methods of assessing the qualities of investment includes a number of private practices that enable numerically evaluate the profitability, risk, liquidity, and other quality of financial assets. Each of these individual techniques should allow passing from estimates of individual assets to the estimated portfolio consisting of these assets. In the framework of portfolio theory can be evaluated an unlimited number of investment portfolios of assets and qualities, but a set of these qualities and characterizing their performance should be identical for all types of assets, potentially in the portfolio.

There are unlimited multifactor portfolio theory, on the one hand, the complexity algorithm optimization of the portfolio, and on the other hand, allows to simplify the estimation algorithms of investment qualities of the assets used as criteria for selecting the optimal portfolio, as it is possible to characterize such complex qualities as a risk or liquidity, several private performance instead of one composite.

The evaluating the effectiveness of portfolio investments is on a regular basis after the portfolio formation. The portfolio manager evaluation is performedin order to decide whether to restructure the portfolio and investor — with a view to a decision on whether, or to continue investing in the previously set parameters, or change the settings, or liquidation of the portfolio. In addition to the analytical basis for decisions related to portfolio management, performance evaluation of investment is needed to confirm the adequacy of the methodology used for its formation.

The classical portfolio theory G. Mapkovitsa — J. Tobin of the structure of the portfolio optimization technique supplemented algorithm functional formalization of indifference curves, including the case of multi-factor optimization, eliminating the time-consuming and subjective graphical approaches to simplify the numerical reflection of personal preference and increase the portfolio of the investor the level of automation of portfolio decision-making.

In general, a multi-dimensional equation of the curve (hyperplane) of indifference can be as follows:

(1)

where R — equivalent yield; xi — value investment characteristics; № - number of characteristics, ai, ki — coefficients.

Each of the independent (risk) factors in the model for ease of reading and interpretation of the results must be submitted to the inverse: the deterioration of the quality of the investment — increasing the value of the indicator. Absolute (zero) standard investment asset for all design performances will be free cash flow, profitability, risk, liquidity, and other indices which are equal to zero. Thus, the problem of choosing the optimal portfolio is reduced to finding the portfolio, for which the maximum difference between its expected performance and graphics ordinate the indifference curve.

If we consider this difference as a function whose arguments are the parameters of the indifference curve and the investment portfolio characteristics, then to find the optimal portfolio is applicable standard method of finding the extremum of function, based on equating to zero its derivative. This algorithm allows

The analytic way to determine the structure of the optimal portfolio is known function of indifference curve. For example, for a portfolio of two assets, estimated in accordance with the theory of G. Markovitsa expected return and standard deviation for the indifference curve of the form portion of the assets in the optimal portfolio is calculated as follows:

where X_A, X_b — share of assets in the optimal portfolio (expressed as a decimal) — the expected return on assets; уA, уB — the standard deviation of asset returns; C v_AB — covariance of asset returns, and — factor.

The proposed algorithm for finding the optimal portfolio of two assets can be used in conjunction with a classical algorithm for finding the corner portfolios, because after calculating the parameters of the portfolio optimization problem basically boils down to their pairwise combinations.

In the method of forming the portfolio, partially funded by borrowed money, the classical portfolio theory was complemented by a model of interest rates determine the intervals at which the appropriate financing of the investment portfolio by risk or risk-free borrowing. With the help of this model for any set of risky assets may be determined by the maximum risk-free rate rf ', in which risky debt attractive to investors, as well as minimum risk-free rate rf «, in which can be an effective unlimited risky borrowing.

In particular, two assets portfolio of tender rf 'and rf «are defined as follows:

where — the expected return on assets; у2A, у2B — the variance of asset returns; C v_AB — covariance of asset returns.

This technique can be easily extended to the case of a more diversified portfolios.

The need to develop standard methods of numerical evaluation of the liquidity of individual securities and portfolios due to the fact that the practice of an expert (qualitative) assessment does not allow for the inclusion of the liquidity factor in the complex formal analytical models used in the framework of portfolio theory.

The study specific liquidity as an investment analysis has shown that liquidity is not an abstract inherent characteristic of an investment asset. The level of liquidity of the security also depends on the set of investment conditions, including the value of the investment portfolio of the expected maturity investments of the portfolio management strategy chosen by the investor, and other factors, security, part of a small-scale package, the sale of which is not planned for quite a long period, is much more liquid than the same security that is included in a large package is used extensively for speculation. In the latter case, a special assessment of the liquidity of equity instruments is the most important.

1.3 Structure, transactions and rules

The stock market has arisen at a certain stage of development of the market economy emerged in connection with the need for new forms of currency. Formation of the stock market in the current context of market relations is associated with an increase in the share and role of financial capital, development capital loan and credit relationships that have emerged to resolve the contradictions that are emerging in the process of binding and release of capital.

Stock market covers a part of the credit market, particularly the bond market and the stock market completely. In other words, it’s the stock market, which made their production, distribution and sale. The product specific stock market — various types of securities. The main purpose of the analysis of the securities market is to ensure the normal functioning of all sectors of the economy by investing large amounts of capital in their operations. There are different classifications of the stock market.

The most common classification of the stock market divides them into four groups: issuers — legal (in some cases, physical, if the legislation) those which issue securities and carry out in connection with certain responsibilities. Often identify the issuer and seller of securities. But it should be noted that the term issuer and seller are the same in the primary securities market and are not the same in the secondary, where they are reselling, investors — individuals and legal entities, including institutional investors (investment funds, trust companies, pension funds, insurance companies, etc.) that have available funds and may invest in securities to generate income (percent) or an increase in the market value of securities intermediaries — legal entities that provide certain services on the implementation of stock operations, issuers and investors, the state adopts legislation creates the relevant authorities and thus determines the conditions of the legal regulation of the stock market in order to maintain its effective functioning and protection of its members.

Intermediaries in the stock market can be companies that specialize in working with securities and operate as agents for the production and circulation of securities, banking institutions, which, along with other financial functions can operate as agents for the production and circulation of securities, as well as provide Loans related to securities, investment companies, combining the functions of a financial intermediary and institutional investor.

For its activities, resellers can create voluntary associations, including the stock exchange. Stock Exchange is an organizational designed, permanent market on which the securities trade. Ensuring safekeeping of securities and registration of the transfer of ownership is carried depository, settlement and clearing agencies and registrars.

The sellers of the stock of capital are: financial institutions, and commercial and investment banks, insurance companies, savings banks, pension funds, etc. The buyers of capital are state, commercial and industrial companies, private persons. The main macroeconomic function of the stock market is to transform temporarily idle funds into productive investment, that is, to transfer financial resources from the lender to the borrower. The stock market serves as economic, political, social. As part of the economic function of the stock market: Provides contact the seller and buyer; accumulate cash population (savings) and businesses (temporarily free funds) balances the supply and demand of securities in the stock market, contributes to the stabilization of prices, optimize the industrial and regional structure, providing overflow capital from less profitable sectors and regions in the highly profitable, technologically advanced industries and promising regions; aligns rate of return on invested capital, supports the implementation of science and technology by creating a joint venture firms and other measures to encourage the development of new technologies; negotiates property state, institutional and individual interests in the process of circulation of securities and softens the state budget deficit, the state securities market indicates the state of the economic situation. The essence of the political function of the stock market is to facilitate the establishment of the economic independence of the state, attracting foreign investment through the sale of shares, creating a truly market system.

The social function of the stock market appears to enable people to more profits and the formation of owners of securities. In addition, the flow of capital contributes to the creation of additional jobs. Taking into account the stages of functioning allocate primary and secondary securities markets.

In the primary market will initially be allocated securities to investors. The main task of the primary market is allowedto minimize the risk of the investor. This is the aim state legislative regulations governing the operation of the market. The primary market securities are reviewed: the major issuers, major investors, the main objects of transactions, the main forms of agreements. The main issuers is the state, private companies, international bodies.

The main investors are the people, the government, commercial bodies. The objects of transactions are public, private and international securities. There are two forms of transactions — offering of securities by way of auction or public sale.

Initial placement of securities shall be made in levels. First, the issuer decides to issue securities, and then there is the open or private placement. Open seating provides for the registration of information on the securities issue and the organization to subscribe to them, a private placement of securities occurs among individuals. At the final stage of the securities is issued to the owners or the owner is registered in the system registry of owners. The secondary market provides trading of securities. Its main function is to create conditions for the general trading of securities, provision of liquidity, to determine the market price of the securities and the provision of information about its changes.

For organizational forms are distinguished Stock Exchange and OTC securities market. Exchange market, as a rule, is the secondary, submitted by the stock exchange. That is, it is a market with a high level of organization at which special rules made the purchase and sale of securities. The main subjects of the exchange market are the sellers, buyers and intermediaries — brokers, dealers.

OTC market(over-the-counter market) is a secondary and serves medium and small in terms of equity of issuers that, for objective reasons, do not expose your assets to the stock exchange. The basis of the OTC market is the computer connection, the channels that transmit information in respect of the shares listed.

The volume of trading in securities through the stock exchange and OTC market in developed countries is almost identical. Typically, the leading one is the stock market; there is a concentration of centers of stock trading in securities.

The securities market is also characterized by the following features: in terms of production: fixed-term treatment and perpetual securities, outside the territory of distribution: international, national, regional markets, by types of securities: market shares, bonds, etc.

The efficiency of the securities market is determined by the supply of the latter, as well as the largely consumer potential of society as a whole. Effective demand in the stock market depends strongly on the ability of households to save, their incomes. For example, in countries with a high standard of living of households owning stocks is quite high about 49−51%.

The economic literature identifies two points of view about the importance of the financial system for the economy as a whole and for its economic growth in particular. Proponents of the first believe that the financial market does not play a significant role in economic development. Therefore, for example, J. Robinson argues that the financial market does not stimulate economic growth, and its development is only a response to the expansion of the real economy. In his review of the theory of economic development of H. Stern does not even mention the financial market as a factor contributing to economic growth. In the works of the first researcher’s theories of economic development, including Nobel laureates, it is argued that the financial system plays a minor role in economic development. Moreover, one of them, R. Lucas, says that economists often exaggerate the role of financial factors in economic development.

In contrast to the first, a much larger number of economists is of the view that emphasizes the importance of the financial system to promote economic development. B. Bagex J. Schumpeter, P. Cameron, P. Goldsmith provide conceptual explanations and empirical examples of the positive impact of the financial system on economic growth. Based on these assumptions, A. Gelb, E. Ghani, J. DeGregorio, P. Giudotti show that the value of capital market development is closely correlated with economic growth in a large sample of countries. The result of this research lies in the fact that a well-functioning financial market is a key element to sustain economic growth.

P. King, P. Levin, Zervos, T. Beck and H. Loayza provide empirical evidence to support the view that financial development causes economic growth at the country level. At the sectorial level, R. Rajan and L. Zingales show that industry-funded from external sources, is growing faster in financially developed countries. At the firm level, A. Demnrguk Kant and V. Maksimovic, using its own model to estimate the level of growth in the absence of external funding, finding that firms in developed countries finance grow faster than predicted by their model.

In his works J. Dzhayaratne and P. Strachan, J. Greenwood and B. Jovanovic also confirm that the main source through which financial market has a positive impact on economic growth, improve the quality of resource allocation in the economy. J. Vurgler proves that developed financial markets, measured as the value of the domestic stock market and credit markets relative to GDP, improve the allocation of resources.

At the beginning of the year, it is used to make conclusion. It is interesting in this context to look at the capitalization and its performance over the past year, the national stock markets around the world. According to Blumberg largest by market capitalization at the end of the world market in 2010 is the United States, occupying nearly one-third of the world market capitalization. Of the five largest markets in terms of capitalization, three are in Asia: Japan, China and Hong Kong. Of the four stock markets of the BRIC countries (BRIC) is the smallest Russia, notably (at times), yielding a national stock markets of China, India and Brazil. Moreover, the stock markets of developing countries are beginning to overtake the stock markets of developed countries: India surpassed Germany and China ranked third in the world, behind only the U.S. and Japan.

I was surprised markets in South Africa and Turkey. The stock market in South Africa was quite large — comparable in terms of capitalization with Russia, and Turkey is quite small — in two and a half times less than the Russian one.

Table 1. Capitalization of world market

It was changed and the proportion of the various national stock markets in total. There is the most notably the share of the Canadian market by 0.51% to 4%. Then there are South Korea (0.3% to 2%), Russia (0.3% to 1.3%) and India (up 0.28% to 3.1%). In 2010 there was a sharp decrease in the share capitalization of stock markets in France (at 0.71% to 3.4%), Spain (by -0.51% to 1.2%) and Italy (by 0.34% to 1, 15%), as well as Brazil and Hong Kong.

Fig. 1. Changes of capitalization national market in 2010. %

The role and value of the stock market as a system of market relations are determined by the following factors:

Attraction of available funds in the form of investment for the development of production;

— to ensure that capital flows from decaying industries in the rapidly progressing field;

— to raise funds to cover the deficit of the federal and local budgets;

— ability to assess the state of the economy on indicators of the stock market;

— influence on the change in inflation.

The securities market is like any other market, is a complex organizational and legal system to a specific technology operations.

Schematically, the organization of the securities market can be expressed as the following related items

The main objective of the securities market is to attract investment into the economy. For this purpose it is necessary for the following conditions:

— freedom of movement of capital;

— provision of liquidity of the securities, which is achieved due to the large number of buyers and sellers and small differences in the prices of sales and purchases;

— availability of commercial systems to provide contact sellers and buyers;

Information transparency of the market.

Information should be accurate, correct and meaningful. Therefore, great attention is paid to the stock market disclosure by:

Issuers of financial condition of the company, the upcoming release of securities, major shareholders, etc.;

And organizers of trade, trade rules, conditions of listing and the like; regulators of changes in the regulatory framework, the system of control over the activities in the financial market and compliance with work rules.

CONCLUSION

The rise of the stock markets in the countries in the last decade occurred just at an incredible rate. If during much of the 1990s stock market capitalization of emerging market economies in relation to the total GDP of these countries fluctuated around the level of 20−25%, since the beginning of the century to 2007 it has increased almost three-fold.

Over the past fifteen years, the total market capitalization of emerging market economies has increased approximately tenfold, from less than U.S. $ 2 trillion in 1995 to about 5 trillion U.S. dollars in 2005 and about 19 trillion U.S. dollars by the end of 2010. In comparison, over the same period the total market capitalization of developed countries increased only twice. Since the beginning of the century the share of emerging market economies in the global stock market capitalization has increased from 7% to the current value of approximately 30%.