124.Brokerage firms

Brokerage firm, or simply brokerage, is a financial institution that facilitates the buying and selling of financial securities between a buyer and a seller. Brokerage firms serve a clientele of investors who trade public stocks and other securities, usually through the firm's agent stockbrokers. A traditional, or “full service”, brokerage firm usually undertakes more than simply carrying out a stock or bond trade. The staff of this type of brokerage firm is entrusted with the responsibility of researching the markets to provide appropriate recommendations and in so doing they direct the actions of pension fund managers and portfolio managers alike. These firms also offer margin loans for certain approved clients to purchase investments on credit, subject to agreed terms and conditions. The second type of brokerage firm is “discount broker”. It can be divided into two parts: premium discount broker (low commissions; limited research or investment advice) and basic discount brokers (main focus is executing trades electronically online; no research or investment advice; commissions are at deep-discount). Brokerage firms can be created by exchange members or legal entities who purchased brokerage place temporarily. Firms are registered in the register of brokerage firms. Once registered brokerage firm receives a certificate and brokerage place. Brokerage place can be sold on the exchange trading or auctions. Brokerage firm must have its permanent address, current bank account, seal, stamp, etc. The way in which exchange interacts with brokerage firm is determined in the charter of exchange. Exchange Executive Directorate and other agencies of the exchange do not interfere into the relationship between the firm and the members of the exchange. Brokerage firms derive their profit from commissions on orders given. That is, they usually collect a percentage of the value of each transaction, though some charge flat fees. Clients may give orders in a variety of ways. One may meet with a broker, call on the telephone, or give orders over the Internet.

The organizational structure of the brokerage firm may be different, but the basic departments and their functions are similar. The Department of new accounts ,Department of margin, Division of orders, Department of Data Processing. Here all agreements are reviewed and entered into a computer, which produces reports agreements. Front office operations are:

• interaction between brokers and clients;

• analytical operations provided to various departments;

• help clients to manage their accounts.

Back office operations:

• maintaining accounts;

• clearing;

• providing the information systems that the firm uses to transmit market data, quotes, orders, etc.;

• ensuring that the firm extends credit only to good credit risks;

• ensuring compliance with regulations.

125. Fundamental analyses on financial market: what does it mean and how it works?

Fundamental Analysis is a method of evaluating a company (it’s securities) by attempting to measure its intrinsic value by examining related economic, financial and other qualitative and quantitative factors. Fundamental analysts attempt to study everything that can affect the security’s value, including macroeconomic factors (like the overall economy and industry conditions) and individual specific factors (like the financial condition and management of companies).

An information to be analyzed on the stock market and foreign exchange market is different. That’s why, fundamental analysis of the stock market and fundamental analysis of FOREX market are distinguished.

Fundamental analysis on the stock market –is a number of methods of forecasting market (stock) value of the company based on the analysis of financial and corporate performance indicators.

Objectives of fundamental analysis are:

-To predict the direction of national economy because economic activity affects the corporate profit, investor attitudes and expectation and ultimately security prices.

-To estimate the stock price changes by studying the forces operating in the overall economy, as well as influences peculiar to industries and companies.

-To select the right time and right securities for the investment

Fundamental analysis for the Forex market examines the macroeconomic indicators, asset markets, and political considerations of one nation’scurrency as opposed to another.

The objective of fundamental analysis is to determine the fair price of the currency. Comparing the estimatedprice and the current market price, it is concluded if the currency is overestimated or underestimated. The difference between the forecasted and actual values ​​usually gives grounds for making trading decisions. Current political and economic news are provided by many news agencies in real time and transmitted to clients with real accounts directly in the trade terminal. News can be expected (eg, published under the plan) and unexpected (random). Expected news are related to economic indicators, sometimes it can be information of a political nature the election results). Random or unexpected news are usually concerned with political or natural origin (natural disasters, wars.)

Macroeconomic indicators includethings such as:

• growth rates (Gross Domestic Product),

• interest rates,

• inflation,

• unemployment,

• money supply,

• foreign exchange reserves