The Concept and Classification of Stock Exchange Transactions

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Generally speaking, transaction can be defined as a convention between two or more parts, through which certain rights are passed, or a commercial exchange is made.

Stock exchange transactions are seen as contracts of purchase of titles and of other financial assets, concluded on the secondary capital market, with the agents de change from the respectively authorized societies of financial intermediation as a go-between. These transactions are to be handled according to the law on securities from the respective country and to the regulations of the implied institutions (Stock exchange Market, OTC, etc.).

The interpretations of the notion of stock exchange transactions have gradually evolved over time, especially recently, so that, if traditionally stock exchange transactions were considered only that contracts concluded inside the Stock exchange and during the trade, now the only condition to be accepted as such is for them to be registered at the Stock exchange. Besides, this occurred as a result of the bourse delocalization phenomenon, the globalization one as well as the OTC market’s appearance.

There is a big diversity of types of stock exchange transactions. Regardless to their nature, the transactions’ technique is marked by the way of their settlement and the price at which these are realized. This way, two big categories occur:

- Spot transactions;

- Time bargain (forward);

According to their object, stock exchange transactions can be:

- Transactions with primary financial securities;

- Transactions with derivatives;

As what concerns the transactions with primary financial securities the attention is focused on two models of transactions:

- American;

- European;

According to the American model, transactions can be:

- For cash;

- On margin;

- Short selling;

The European model includes the following types of transactions (according to the French securities market model):

- Au comptant (spot);

- Au reglement mensuel (time bargain);

- A prime (conditional operations).

Transactions with financial derivatives are represented by futures and options.

Main categories of stock exchange transactions

Fig.1. Types of stock exchange transactions

As what concerns the transactions with primary financial securities the attention is focused on the transactions according to the American model (which are specific to the Asian stock exchange, too) and to the European model.

Transactions according to the American model

Transactions for cash are those market operations in which the buyer has to pay for all the securities he is going to buy, entirely with cash, and respectively the seller has to own them and immediately to deliver them to the broker who had placed the order.

On the stock exchanges corresponding to the American model, according to the moment of the execution of the contract, can be met the following types of transactions:

- Cash delivery- when the execution (delivery/payment of the securities) takes place in the same day with the entering into the contract;

- Regular settlement- where the execution of the contract is made after/in a certain number of days from the moment of entering into the contract;

- Agreement based settlement – usually executed at a date arranged by parts, but not later than 60 days after concluding the contract;

- When issued- for financial securities that had not been yet issued, but it is known the date of their issue.

In order to execute such transactions, the investor has firstly to open a simple investment account or a cash account at the agency of a broker that acts as an intermediary. Through this account the evidence of transactions, of owned securities, of prices and others is held.

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