Legal support of transactions with securities

Securities are the main link in the formation of the financial position of any state. In the Russian Federation, financial transactions for the sale and purchase of securities are poorly developed compared to other countries. Because of this, there is instability. The second reason for instability is the redistribution of property, the decline in prices for shares and bonds. This happens even among large companies. Despite the complexity of the operation, the stock market with securities in Russia generates huge income, and in the near future it will become the main type of investment.

What are shares

A share is a security that gives the owner the right to part of the profits from the business in the form of dividends, as well as to manage the activities of the company in which he owns a share. In fact, the owner of the share becomes a co-owner of the business, even if only to a small extent, if he buys a minimum share.

If the company's activities are successful, the share price rises. This is beneficial for the owner of the security, since he can buy cheaper and sell more expensive and make money on the difference.

Shareholder profit can be of two types:

• dividends - the general meeting of shareholders decides what procedure and amount of payment is due to shareholders;
• the difference between the purchase and sale prices of a stock.

If the stock has fallen in price, the owner may receive a loss rather than a profit if he sells the security at that moment. Any investor should understand this and be prepared for the risks associated with investment activities.

All shares of Russian and foreign companies are traded on stock markets. In order to buy them, an individual will need to become a participant in this market through an intermediary - a broker, who will conduct all transactions for him.

The advantages of shares compared to other assets on the stock exchange are that they:

• liquid, that is, they can be easily sold at any time, especially if we are talking about shares of the 1-2 tier, and not about the so-called “junk” securities;
• reliable – securities are legitimate and protected by law;
• unlimited profit margins;
• available – you can become the owner of shares at any time after opening a brokerage account;
• flexible, you can buy shares of both high and low value in different fields of activity and market segments.

In addition to shares, you can also buy other financial instruments on the stock exchange, such as mutual funds, ETFs, and bonds. It is better for newcomers to the stock exchange not to invest in more complex assets.

Find a suitable broker and open an account with them

The safest way to buy shares of a company is to contact a broker. He is the link between the exchange and individuals who want to conduct transactions in securities.

Main functions of the broker:

• account keeping;
• execution of orders for the purchase and sale of securities and other instruments;
• preparing analytics for the client;
• conducting training.

The broker may be a special finance company or a bank. The main condition is the availability of a license from the Central Bank of the Russian Federation to carry out brokerage and depository activities. There are about 300 licensed companies in the Russian Federation. The current list can be found at this link. Before checking the broker, do not sign any documents or agreements. Some companies offer supposedly brokerage services, but it is better not to cooperate with them so as not to lose all your money.

To avoid encountering scammers, register on the official website of the Moscow Exchange. Here you can open a brokerage account online with a suitable licensed broker. There are no unlicensed brokers on this site.

To open a brokerage account you will need:

• passport photo – two double-pages, telephone photo is allowed;
• TIN and SNILS numbers without photographs;
• 10 minutes to complete the online application;
• 1 business day for approval of the application by the broker.

After opening an account, you can open a personal account on your broker’s website to conduct transactions with securities.

Broker selection criteria

When comparing brokers, pay attention to several factors:

• availability of a license from the Central Bank of the Russian Federation or confirmation from foreign regulators if you cooperate with foreign companies;
• restrictions on the amount for opening and maintaining an account;
• commission and other payments for servicing a brokerage account;
• experience as a broker in the market;
• company activity in the market;
• selection of securities offered by the broker;
• amount of assets;
• volume of transactions carried out;
• software;
• convenience and speed of replenishment and withdrawal of funds;
• reliability rating;
• quality of customer support.

An additional condition is to check which exchanges the broker works with. If you plan to work with the assets of foreign companies, the list of brokers will be more limited than for transactions with Russian shares.

There are two exchange platforms in Russia: PJSC Moscow Exchange and PJSC St. Petersburg Exchange. You can buy shares of foreign companies only through a second one.

When choosing a broker, carefully study not only the prices for account servicing. Sometimes tariffs with minimal commissions turn out to be just a promotional ploy, and the actual costs of maintaining an account and depository services are much higher. The exact terms are contained in the contract. Study it before you sign.

Top 10 Russian brokers

If you don’t have time to select a broker yourself, you can use the “majority opinion”. Choosing a suitable broker from 300 companies is much more difficult than from 10-15. Moreover, as the figures show, these companies serve more than 90% of all clients.

According to Moscow Exchange, the number of registered and active clients differs significantly.

Active are those that performed at least one transaction in the reporting month. A total of 1.7 million customers are included in the top 10 for February 2021, while the total number of registered users exceeds 11.85 million.

The reliability rating of brokers is designated by the letters A, B, C, D from highest to lowest. To detail the assigned level, repetitions of letters are used, for example, AAA, BB and the signs “+” and “-”. The highest level of reliability is AAA+, if the broker has a rating of C or D, this indicates that the company is close to default.

It is not advisable to choose a broker with a rating lower than BB-; it is better to start cooperation with companies with a level from AA- to AAA+. The broker's rating is posted on its official website.

How to get basic knowledge

Before you begin evaluating brokers, selecting a trading strategy, working with a screener, and directly purchasing shares, you will need theoretical foundation . I consider basic knowledge to be those that give an idea about trading participants , the principle of operation of the stock market, and the mechanism for generating profit when working with securities.

to pay for this information , I recommend:

1. Read books.
2. Participating in free webinars, lessons for beginners will not be superfluous. Do not choose paid training options.

At this stage the goal is to understand how the market works and realize that there is nothing complicated in trading. The main problem is controlling emotions . Don’t stay too long at this stage, theory is important, but knowledge needs to be consolidated in practice .

Transfer money

To buy company shares, fund your brokerage account. You can do this in three ways:

1. Deposit money into the account at the cash desk of the broker or bank where the brokerage account is opened. In this case, there may be no commission for replenishment. But this can be found out for sure in the account servicing agreement. The enrollment period takes no more than a few minutes.
2. Transfer money using the details from any bank account to a brokerage account. Banks usually charge a commission for such an operation, and the credit period can last from 1 to 3 business days.
3. Top up from a bank card. Money is written off from the card and credited to the brokerage account instantly, but a commission of 1% to 2% is charged for the operation. The exact rates are indicated on the website of the selected broker or in your personal account.

For any of the deposit methods, you can check your brokerage account in your personal account. Some brokers notify the account owner with a notification on the phone or in one of the selected instant messengers about the receipt of the amount.

Decide in which market you will buy shares

The requirements for you as a trader/investor directly depend on this. Let me give you an example:

1. An individual plans to buy American shares through a broker registered outside the jurisdiction of the Russian Federation. In this case, Russian legislation does not limit the trader in the choice of instruments.
2. If you want to work with the same securities, but through a broker operating in the legal framework of the Russian Federation, you will encounter a number of restrictions . For example, traders without the status of a qualified investor ( CI ) receive access to a limited number of shares and cannot work with American and global depositary receipts ( ADRs and GDRs ), and a number of Eurobonds. You can buy a number of securities without CI status, but if more than 7,000 instruments are available on American exchanges, then you will have access to 600-700. You can view the list here .

The restriction in the form of CI status was introduced to protect non-professionals from excessive risk. If one of the following conditions is met, you may become a CI:

• The invoice value should not be less than 6 million rubles . This refers to both money and already purchased securities.
• Have at least 2 years of work experience in the investment sector in a company that has CI status . Otherwise, you need to work for at least 3 years in this direction.
• During the year, a trade turnover of 6 million rubles was achieved . In this case, transactions must be concluded at least once a month and 10 times a quarter.
• There is a specialized higher education (there is no single list of universities, you need to check with the broker whether your educational institution is listed).
• There are certificates of CIIA, FRM, CFA, auditor, insurance actuary.

But if you don't meet any of these criteria, don't be too quick to get discouraged. All restrictions can be easily circumvented by opening an account with a broker registered outside the Russian Federation. As an option, work with Russian companies, but through their foreign subsidiaries. If the requirements of the same Interactive Brokers seem too stringent, you can open an account with the offshore Just2Trade - it has a minimum entry threshold.

Install software to work on the stock exchange

In Russia, software for brokers is divided into two types: QUIX and any others. The classic QUIX platform is more suitable for experienced traders and investors. It is quite complicated for beginners, so lamprey brokers develop their own software in order not to scare away new clients. For example, for Sberbank it is “Sberbank Investor”, for Tinkoff Bank it is “Tinkoff Investments”, for Alfa Bank it is “Alfa Direct”, for BCS it is “My Broker”.

Brokers’ own software is more understandable for beginners and can be used on different devices through:

• mobile application that can be downloaded from the AppStore or GooglePlay;
• programs for laptops and computers;
• online pages in a browser from any device.

Such software does not require special knowledge or settings. It is enough to request a login and password from the broker and you can use it immediately. And to set up the QUIK terminal, you need the public keys pubring.txk, secring.txk and knowledge of technical details. A manager can help with installing the QUIK terminal, but for beginners, broker software will be more convenient than specialized software.

Find stocks to buy

When choosing stocks to buy, it is important to understand your approach and choose a strategy. All company names on the stock exchange are encoded, and shares are sold using a specially lettered ticker. For example, Sberbank’s ticker is SBER, and Tesla’s is TSLA. But some tickers can be easily confused, so if in doubt, it is better to look for information rather than buy the wrong one.

All stocks on stock exchanges are traded in lots of 1, 10, 100 or even 10,000 units. But this does not mean at all that the more shares you buy, the more you will earn.

Experienced investors and traders, when buying and selling shares, focus on two options for analyzing securities - technical and fundamental. Strategies can combine or use just one. Each method has its supporters and opponents, so each new market participant determines for himself what suits him best:

1. Fundamentalists study the company's financial statements, delve into the business and the market situation. They also pay attention to competitors and, based on all the information collected, make a decision whether the stock is overvalued or undervalued. After this, it becomes clearer for them to sell, buy or hold the stock further in their portfolio.
2. Followers of technical analysis base their calculations on the price movement chart. Since, in their opinion, all the information that fundamentalists study is already included in the stock price.

If you have no experience or desire to delve into any of these approaches, you can choose to invest in mutual funds or ETFs. These are balanced investment instruments that already include shares of several companies from different business areas. A fund participant automatically becomes a co-owner of many businesses. You can choose only Russian funds or with the participation of international companies.

The second investment option without fundamental or technical analysis is to buy shares of well-known companies or, as they are also called, “blue chips” or first-tier shares. For example, Sberbank or the oil and gas industry. As a rule, they gradually increase in price, and if they sag, it is only for a short time, and then they recover in price.

Set Goals

Before you buy anything on the stock exchange, decide why you are investing at all. Each exchange participant pursues his own goals. This could be a desire:

• preserve what is;
• increase money and save up the amount to buy an apartment, vacation or study for children at a prestigious university;
• accumulate capital to live on passive income.

The goal must be specific in terms of timing and amount. Then it is much easier to follow the plan.

After establishing a financial goal, the following are more clear:

• motivation to achieve it;
• control of each stage along the path to the goal;
• desire to increase one's own productivity;
• the onset of self-satisfaction upon achieving the goal.

The risk that is acceptable for the chosen plan depends on the goal. Highly profitable assets are the riskiest, there is a directly proportional relationship here: the more income you want to get, the higher the probability of losing all your invested money.

Evaluate your resources

To open a brokerage account with some brokers you will need a certain amount, other companies do not set any restrictions. For real results from investment activities, it is most often necessary to deposit an amount of at least 0.5 million rubles into the account. But to gain initial experience, you can start with 10-50 thousand to learn the software and other nuances of cooperation with a broker.

For an amount of more than 500,000 rubles, you can create a high-quality diversified portfolio for long-term and medium-term investment.

Define your strategy

The choice depends on the strategy of the investor or trader:

• a broker who is more suitable than others;
• tariff: for a beginner or experienced investor or trader;
• instruments: stocks, bonds, funds, futures, options or any other assets;
• duration of investment: speculative, short-, medium- or long-term.

Pay attention to the unspoken rule: the shorter the period until the financial goal is reached, the less risky the instruments should be. It is very important not to change your strategy too often. As the experience of famous investors shows, it is the ability to follow the chosen path that leads to the best results. And deals without a plan, goals and strategy will turn out to be the most unpromising.

Conduct a security purchase transaction

Trading on the stock exchange takes place online via the Internet. The Moscow and St. Petersburg stock exchanges have their own schedule for conducting transactions. You can view it on the official websites of Russian background markets.

There are two ways to buy company shares during a trading session:

1. Open the terminal and enter the application yourself.
2. Call the broker and give an order to his trader to carry out a transaction on behalf of the client.

When submitting a voice order, please indicate:

• brokerage account number;
• FULL NAME;
• name of the promotion;
• type of transaction - purchase or sale;
• number of lots in the transaction;
• condition for execution of an order - at the market price, at a certain price or upon reaching a certain price level per share.

For a completed transaction, the broker will write off a fixed amount or commission, depending on the established tariff. Sometimes the account owner does not pay for each transaction, but for the turnover on the account or a fixed amount.

If you conduct transactions through the terminal, all stages may take only a few minutes, the main thing is that the application is submitted during the working hours of the exchange.

Correct algorithm of actions

I recommend organizing everything as follows:

• Open an account with the broker of your choice, top it up with the amount necessary for comfortable work, at least $500
• Download and install the terminal on your PC and phone. It is difficult to analyze the market through a smartphone, but it is suitable if you need to control already open positions, and you urgently need to go on business.
• Develop an algorithm for selecting stocks to work with . Use a screener, for example, on finviz.com. If you are engaged in active trading, you need to select a pool of securities for the day every day. The terminal itself may also have a tool for searching for stocks, but I consider the option on finviz.com to be one of the most convenient.
• When trading, be sure to consider the ratio of take profit to stop loss. If a signal meets all the requirements 100%, but the profit is approximately equal to the potential loss, it is better to skip it. It is desirable that the stop be 2-3 times less than the take profit. For beginners, I recommend reading the post on how to trade stocks.

At one time I started working exactly according to this scheme. At first I was chasing the number of transactions and could not accustom myself to discipline. But over time, I realized that the quality of trading is more important, it is better to make 5-7 trades a week and close 80-90% with a profit than to enter the market every day 10-15 times and receive zero profit for the majority of transactions.

What to consider when conducting transactions

Before you start actively buying shares of companies on the stock market, pay attention to a few tips:

1. Choose a strategy - speculation or long-term investing. It is better for beginners not to start with active trading; you can lose all the money credited to your brokerage account. When you have enough experience, you can try to become an active trader, if you so desire.
2. Research the business before you buy shares of the company. Financial reports, market position, competitors' actions, and even any news and rumors, both about the business itself and about its top officials, will be useful. But you need to make a decision carefully and soberly, abstracting as much as possible from any supposed insider information.
3. Check to see if the company pays dividends, especially if you are planning on this type of profit from purchasing shares.
4. Rebalance your portfolio. Sell ​​what seems unpromising and is in the red, and buy other shares. Carry out the operation periodically - once a month or quarter.
5. Do not sell shares as soon as a correction has occurred or a minor negative has occurred. Trading on the stock exchange is a marathon; the longer you trade on the market, the more knowledge you accumulate in this area.

Remember, money invested in stocks or other assets is not protected, like funds in a bank deposit, for example. Therefore, it is very important to understand the full extent of responsibility for the risk that you take when becoming an investor or trader.

Choosing a trading strategy

At this stage you need to decide on your working style :

• The passive mode of operation involves the formation of an investment portfolio and its subsequent adjustment 1-2 times a year . Here you need Buy & Hold strategy - carefully analyze companies and select those whose growth potential in the coming years is maximum. If you haven’t worked in this mode before, go through an educational program on how to choose a broker for investment, profitability and the final result directly depend on this. A strategy aimed at obtaining constant income can also be used , in this case the emphasis is on the securities of dividend aristocrats . There are many methods for forming an investment portfolio.
• Active trading involves concluding a larger number of transactions.

As for the strategy for active trading , I can’t recommend the best one, but I will give a couple of recommendations on their types:

• Works great graphical analysis. Tools like trend lines, support levels And resistance, channels worth including in your strategy.

  

• No less effective candlestick analysis. The configuration of one or more candles gives performance About, what happened during the formation of the pattern – the bulls or bears won. This method is often combined with the previous one, for example, reversal candlestick patterns are used when the chart approaches a level or trend line. The article Japanese Candlesticks for Beginners talks about this method of market analysis in more detail.

  

• Indicator systems also work . When choosing this type of vehicle, I recommend not using tools whose operating principles you do not understand. If the strategy uses, for example, a dial indicator and there is no explanation of its logic, it is better to abandon such a vehicle.

Do not use exotic techniques (wave analysis, Gann square trading, etc.) . They are difficult to master and achieve stable profits.

Taxation issues

The income of a Russian investor is taxed at a rate of 13%. If a profit of, for example, 50,000 rubles is received from transactions for the purchase and sale of shares, you will need to transfer 6,500 rubles to the budget. If transactions go through a broker, you will not need to pay taxes yourself; the broker will take over this function. Tax on dividends received on shares of foreign companies will be withheld by the issuer at the rate of its country.

If the share was held by the investor for less than 3 years, the income is taxable minus the broker's commission. But if you sell the security after 3 years, the potential gain will not be taxed. If transactions on the stock exchange do not bring profit to the investor, NFDLs are also not retained.

If a brokerage account is opened with a US company, the investor will have different tax rules. On dividends and profits from the sale of shares in the reporting year, taxes will need to be paid in the country where the transactions take place. American brokers retain 10% of profits, and not 13% as in the Russian Federation. Since there is an agreement between the countries on the exclusion of double taxation, the Russian investor needs to pay 3% to the Russian Federation after paying the American tax.

Anyone can buy shares of the company, but it is important to use common sense when choosing a strategy, broker and securities.

Sources:

1. Official website of the St. Petersburg Stock Exchange.
2. Official website of the MICEX.
3. Website of the Central Bank of the Russian Federation, registers of licensed brokers.

about the author

Klavdiya Treskova - higher education with qualification “Economist”, with specializations “Economics and Management” and “Computer Technologies” at PSU. She worked in a bank in positions from operator to acting. Head of the Department for servicing private and corporate clients. Every year she successfully passed certifications, education and training in banking services. Total work experience in the bank is more than 15 years. [email protected]

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Paying tax

I described tax optimization methods in more detail here. Now I’ll just highlight a couple of nuances:

• At the starting stage, you don't have to worry about this . No one is interested in your $200-$500
• When you reach a stable result, you will have to pay without fail . I recommend discarding the evasion option immediately. Practice shows that it is difficult to deceive tax authorities ; with more or less substantial amounts, questions will arise and you will have to answer according to the law.
• If the broker is a tax agent , then he will pay everything necessary for you.
• When working through a foreign company, you will have to fill out 3NDFL yourself and communicate with tax authorities.

There will be no double taxation. Even if you invest in dividend stocks of American blue chips, you will have to pay at the rate accepted in the Russian Federation. An agreement on the absence of double taxation has been concluded between Russia and most countries of the world.

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Author of the article: Klavdiya Treskova

Consultant, author Popovich Anna

Financial author Olga Pikhotskaya

Choosing a broker

Over the years of work, I have compiled my TOP of the best companies . Below I will list 4 brokers suitable for both active trading and investing. I consider the best:

Just2Trade

You can work with all types of assets ( stocks, currency pairs, cryptocurrency ). I would like to note that there is a single account for entering all the largest platforms in the world; you can only work in the American market. ETFs through it . A review of the Just2trade broker was done earlier, be sure to read it.

Open an account with Just2trade

United Traders

I will name 3 key advantages of the company - a deposit starting from $300 , the opportunity to enter an IPO (more than 70% is earned as a plus), and Aurora terminal is free for the starting tariff . In addition, UT has a license from the Russian Central Bank , so there are no problems with reliability. You can also work with cryptocurrencies here.

Open an account with United Traders

BKS

A reputable company, the leader in terms of turnover . The optimal choice for working with stocks and bonds on the Russian market . If you have a relatively high “white” salary, you can open an IIS and receive additional benefits through compensation for personal income tax or income tax.

Open an account in BCS

Tinkoff Investments

The broker and the bank of the same name work together. Very convenient if you have a Tinkoff card . The main feature is the absence of specialized software (such as QUIK, ToS, ATAS, Aurora). Instead, papers are purchased through an online terminal, and the process itself is similar to purchasing goods in an online store. Tinkoff Investments are ideal for passive work and the formation of a dividend portfolio . In addition, there are no fees for the depository and account maintenance - you can maximize your profitability.

Open a Tinkoff investment account

To make it easier to compare the conditions, I will present them in tabular form.