Life Cycle of Financial Instrument¶
Overview¶
Cycle of financial instruments (or business process of financial instruments) from the beginning till the maturity of instruments is related with many departments; the monitoring department, the transactional middle agent, the data center, and investors depending on roles and responsibilities by laws of those departments. The cycle covers main processes as followings.
- Instrument Issuance
Offering newly issued financial instruments for sale is under the monitoring of the Securities and Exchange Commission (SEC). The SEC specifies regulations of instrument issuance by types and an issuer has to get an approval from SEC excluding government debt securities that need not to ask for the approval. The issuer may appoint a financial advisor, a trading manager, and other related parties for conducting businesses on behalf of the issuer and enhancing the convenience.
- Trading in the Primary Market
The primary market is the financial market for proposing new issued securities or instruments approved by the SEC. Companies needing the financial capital or fund raising from investors directly can issue and propose new issued instruments to investors in the primary market. The instruments can be debt securities, derivative warrants, or unit trusts.
- Trading in the Secondary Market
The secondary market is the financial market for trading and exchanging instruments previously proposed in the primary market between investors. The secondary markets are the Stock Exchange of Thailand (SET), the Market for Alternative Investment (MAI), the Bond Electronic Exchange (BEX), the Thailand Futures Exchange (TFEX), and other OTC markets.
- Interest or Dividend Payment
Interest is a return from the investment in debt securities according to amounts calculated from interest rates stated on debt securities and specified time periods. While dividend is a return from the investment in equity securities which is a profit sharing from the annual business conduction by the consensus of the stock holder meeting. For both returns, issuers have to pay those returns to instrument holders. For derivative warrants and unit trusts, there is no binding as same as the aforesaid instruments.
- Maturity of Instruments
The process of redemption is different in accordance with the type of financial instruments.
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