Bolsas y Mercados Españoles
Choosing your intermediary

   Investment decisions are not only about what, when and how much to invest but also about selecting and using the most suitable channel.

   The most direct route into the stock market is through the so-called market members. These intermediaries, specialising in equity investment, are the only entities qualified to buy and sell directly on the market.

Other financial entities are empowered to administer securities, manage portfolios or process orders through to market members, but not to intervene directly in the market. Banks and savings banks, with their extensive branch networks, have a direct line to the widest number of investors. But other intermediaries, like portfolio managers and commercial brokers, can also receive orders from clients and forward them to market members for their execution.

   The first step for the investor is to approach one of these intermediaries and open a securities account. This is the account through which the investor’s securities portfolio will be administered (purchases and sales, subscriptions, dividends, attendance at Shareholders’ Meetings, etc.). It will also form the basis for cash movements arising from market transactions.

   Before formally opening a securities account, check out the fees you will be charged and the scope of the intermediary’s service delivery (type of orders, ordering procedures: via internet, telephone, etc).

   Investors may also wish to supplement this administration function with more in-depth advice. For this reason, intermediaries offer the possibility of subscribing management contracts whereby it is the intermediary which decides on the purchase or sale of specific securities depending on market performance and the investment guidelines agreed with the client. Naturally, this service means paying a higher fee than for the simple administration or custody of securities.

  The client must be furnished with information on all transactions executed, the economic rights accruing to securities and financial operations affecting the same, alongside quarterly and annual statements on the composition and value of his portfolio.

  Once a securities account has been opened and sufficient funds advanced, the client can issue the relevant purchase and sale orders. These orders must invariably be clearly worded and specify certain conditions: identification of the investor and type of security, the direction of the order (buy or sell), the validity of the same, and the execution price and volume. Unless the client indicates otherwise, the assumption will be that the purchase-sale should be effected at the best price available on the market and that the order will stand until the end of the session in progress.

   Formalisation of the order triggers an extraordinarily rapid process of execution and confirmation. Current technology means that any investor, regardless of his whereabouts, has the same opportunities to buy or sell on the market. The routing systems installed by securities broker-dealers and most other financial intermediaries ensure that order details reach the continuous market operator in a matter of seconds. This operator will then check the data and enter the order in the Spanish Stock Market Interconnection System where it is matched with an opposing order in tenths of a second. This sets in motion an informational flow whereby the transaction is confirmed with the investor. In the case of securities listed on the continuous market, the whole operation will take just a few seconds, provided the investor is willing to buy or sell at the market price.

Immediately following transaction execution, the intermediary will prepare the settlement details. Settlement is the process of securities delivery against cash payment attendant on any market trade. All data on the trade, together with the pertinent settlement instructions, are transferred from the Bolsa to IBERCLEAR (Securities Clearing and Settlement System), in charge of registering securities and settling stock market transactions. This entity also checks that all system participants (securities broker-dealers, banks and savings banks) concur with the settlement details. It then enters the securities with the institution designated by the client and sends instructions for the corresponding cash amounts to be debited or credited in the accounts which entities hold for this purpose at the Banco de España.



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