Financial Law of Kazakhstan

Home assignment
Civil Code,
Chapter 3, articles 128-1 – 139-1.
Statute “On Securities Market”.
(Закон РК «О рынке ценных бумаг»)
Please see these Statutes on the L-Drive, folder “Acts”

Plan
Financial Instruments
Derivatives
Shares
Bonds

Financial Instruments
Financial Instruments:
Money
Securities
Derivatives

Derivatives
Derivative financial Instrument:
Swap
Option
Futures
Forward

Derivatives
SWAP – is a derivative financial instrument where counterparties exchange cash flows.
Cash flows to be exchanged are based on interest rates, currencies, equities, commodities, other base/underlying assets.
Cash flows are calculated over notional principal amount fixed in the agreement.
Notional amount is usually not exchanged between counterparties
Types of swaps: interest rate swaps, currency swaps, credit swaps, commodity swaps, equity swaps, other.

Derivatives
SWAP: example
Party A swaps 1 000 USD at LIBOR + 0.03% against
1 000 USD (S&P to the 1 000 USD notional).
Term is 1 year
In 1 year LIBOR is 5.97%, S&P increased 10%
Party A will pay to Party B: 1000 * (5.97%+.03%) = 60 000
Party B will pay to party A: 5%* 1000 = 50 000
What if S&P falls at 5%
Then Party A will pay additional 50 000 to Party B

Derivatives
Option – is a contract which gives the buyer (the owner) the right, but not the obligation, to buy or sell an underlying asset or instrument at a specified strike price on or before a specified date. The seller has the corresponding obligation to fulfill the transaction – that is to sell or buy – if the buyer (owner) "exercises" the option.
Call option – the right to buy
Put option – the right to sell

Derivatives
Option: example
You buys a call option (a right to buy):
Underlying asset – 1000 barrels of oil
Strike price – 115 USD per barrel
Exercise day – in three months
Today price of oil – 113 USD
Will you exercise your option in 3 month if:
Price - 113
Price - 118

Derivatives
Futures – is a standardized contract between two parties to buy or sell a specified asset of standardized quantity and quality for a price agreed upon today (the futures price) with delivery and payment occurring at a specified future date, the delivery date. The contracts are negotiated at a futures exchange, which acts as an intermediary between the two parties.
Unlike an option, both parties of a futures contract must fulfill the contract on the delivery date.
The seller delivers the underlying asset to the buyer, or, if it is a cash-settled futures contract, then cash is transferred from the futures trader who sustained a loss to the one who made a profit.
To exit the commitment prior to the settlement date, the holder of a futures position can close out its contract obligations by taking the opposite position on another futures contract on the same asset and settlement date.

Derivatives
Forward – is a non-standardized contract between two parties to buy or to sell an asset at a specified future time at a price agreed upon today
Unlike futures, forward contracts are concluded on OTC market
Underlying assets of a deal are not standardized

Securities
Equity - stock
Bonds
Stock represents the residual assets of the company that would be due to stockholders after discharge of debt
Common vs preferred
Dividends
Management of a company