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Securities Market – How to Trade Securities?

16.09.2020

Securities are an essential topic when discussing investing. Whether you know all about securities or just discovered this topic, you might be wondering – how to trade securities? What is the securities market? Let’s find out all about it!

What Are Securities?

First things first – what are securities? To put it as simply as possible, securities are financial contracts that grant the owner a stake in an asset. They have two main features: giving certain rights to the owner; and being tradable in the financial markets. There are various types of securities. For instance, bonds, stocks and options.

When looking for a more precise definition, we should talk about the Securities and Exchange Act of 1934. It states: “The term ‘security’ means any note, stock, treasury stock, bond, debenture, certificate of interest or participation in any profit-sharing agreement”. The original definition goes on for eight more lines. But the key takeaway from this definition is that securities are complex to define. 

If you are looking for a more detailed overview, check out our blog post on what are securities.

Types of Securities

In general, there are three types of securities.

– Equities that represent shares in a company, partnership or trust. The status of equity shareholders differs slightly from the norm. Equity shareholders do not usually receive regular payments (although many equities do pay dividends). Instead, investors profit from capital gains when selling the securities. This of course assumes that the equity shares have increased in value.

– Debts that represent borrowed funds that must be paid back at the end of a set term. For instance, debt securities are corporate bonds, government bonds and collateralized debt obligations. But how do debt securities differ from equity shares? Well, debt holders usually receive regular interest payments but do not have ownership in the company.

– Hybrids that are a mix between the two. Hybrid securities combine some features of equity and debt securities. For example, a hybrid security can be a convertible bond. 

All About Securities Market

Now that you have nailed down the basic definitions, let’s dive deeper. How does this relate to crypto? And where or how to trade securities?

The most straightforward way to explain what is considered a security in the crypto world is by answering three questions. So, does the token represent an investment of money? Is the investment in a common enterprise? And is there an expectation of profit from the work of the promoters or the third party? If the answer is yes, the token is considered a security. A security token creates an expectation of profit from the effort of others. It is essentially an investment contract that represents legal ownership of a physical or digital asset.

Securities Market in Crypto

To sum up, the security token sounds like a great investment. Many investment platforms have come to the same conclusion. But digital securities marketplaces are still hard to find. Most service providers have struggled to create a compliant and functional product. 

One of the pioneer securities markets is developed by CoinMetro and Ignium. Ignium is a Central Securities Depository built on blockchain technology. The partnership between CoinMetro’s digital currency exchange and Ignium’s CSD allows both retail and institutional investors to purchase digital bonds, convertibles, and equities in already established and upcoming companies raising funding.

How to Trade Securities on a Digital Securities Marketplace?

In short, CoinMetro provides the platform for investors to purchase the securities and the secondary marketplace for trading. Ignium provides the issuance, primary distribution, registrar and settlement of the digital securities as well as corporate services for the issuers. 

This makes trading security tokens very easy for end users. All you have to do is follow these simple steps:

– Pick from a basket of tokenized securities such as bonds and equities, issued by aspiring businesses

– Start investing globally with as little as €50, within just a few minutes

– Trade your security tokens on our secondary market. Making it quick and simple to take profit. Our secondary market will b e launched soon!

Now that you know all about the securities market, why not get practical? Head over to our security token platform and start exploring!