Capital Market Instruments Definition, Types, and Supporting Institutions

INVESTMENTS, – Before investing in the capital market, an investor should understand what a capital market instrument is. Simply put, capital market instruments are capital market products that are traded on the stock exchange.

In another sense, capital market instruments are all securities traded on an exchange. Starting from stocks, bonds, derivatives, mutual funds, exchange traded funds (ETFs) and other securities. These instruments are generally long term.

Types of capital market instruments

1. Stock

Quoted from the official website of the Indonesia Stock Exchange (IDX), Thursday (2/12/2021), the first capital market instrument is stock. Stocks are one of the most popular financial market instruments.

Not only popular, stocks are investment instruments that are chosen by many investors because they are able to provide an attractive level of profit.

Shares are a sign of the capital participation of a person or party (business entity) in a company or limited liability company. By including capital, the party has a claim on the company’s income, claims on company assets, and is entitled to attend the General Meeting of Shareholders (GMS).

2. Bonds (Debt Securities)

The second capital market instrument is debt or bonds. Bonds are one of the securities listed on the stock exchange. Bonds are usually issued by corporations and the state. Bonds can be classified as debt securities in addition to sukuk.

3. Mutual Funds

The third capital market instrument is mutual funds. Mutual fund products are an alternative investment for the investor community, especially small investors and investors who do not have much time and expertise to calculate the risk of their investment.

In simple terms, a mutual fund is a forum used to collect funds from the investor community for further investment in a securities portfolio by an investment manager (MI).

4. Exchange Traded Funds (ETFs)

The fourth capital market instrument is the ETF. In simple terms, an ETF is a mutual fund in the form of a collective investment contract whose participation units are traded on a stock exchange.

Although ETFs are basically mutual funds, they are traded like stocks on a stock exchange. ETF is a combination of mutual fund elements in terms of fund management with the stock mechanism in terms of buying and selling transactions.

5. Derivatives

The fourth capital market instrument is derivatives. A derivative is a contract or agreement whose value or profit opportunity is related to the performance of another asset. These other assets are referred to as underlying assets.

Capital market supporting institutions

In addition to having to know capital market instruments, investors are also required to know the institutions and professions supporting the capital market.

Quoted from, capital market supporting institutions are supporting institutions that participate in supporting the operation of the capital market. Capital market supporting institutions have the task and function of providing services to employees and the general public.

List of capital market supporting institutions:

1. Securities Administration Bureau

The first capital market supporting institution is the Securities Administration Bureau, which is a company based on certain contracts with issuers, providing services such as carrying out bookkeeping, transfers and recordings, dividend payments, distribution of option rights, and issuance of certificates.

2. Place of Deposit (Custodian)

The second capital market supporting institution is the Custodian Bank, which is a bank that has obtained approval from the OJK to act as the party providing custody services for securities and other assets related to securities and other services.

Please read Understanding the Role and Duties of Custodian Bank in Mutual Fund Investment

3. Trustee

The next capital market supporting institution is a trustee, which is a company that is trusted to represent the interests of all investors in bonds or credit securities.

4. Insurer

The fourth capital market supporting institution is the guarantor, namely the company that bears the repayment of the principal and interest on bond issuance.

5. Clearing and Loan Institutions

The fifth capital market supporting institution is LKP, which is a company that has the task of recording transactions made by brokerage companies.

6. Settlement and Depository Institution

The next capital market supporting institution is LPP, which is a company that has the responsibility to complete all transactions that have been recorded by LKP.

7. Public Accountant

A public accountant is a party who has the authority to conduct an audit of the issuer’s finances, in order to provide an opinion on the financial statements published by the issuer.

8. Legal Consultant

A legal consultant is a party that provides and signs a legal opinion regarding the issuance of securities by the issuer.

9. Notary

Notary is a party who has the authority to make authentic deeds regarding agreements and statements made by capital market players, especially issuers in the context of going public.

10. Appraiser

Appraiser is the party that issues and signs the appraisal report on the value of assets based on an examination according to the expertise of the appraiser.

Also read Economic Growth Definition, Characteristics And Factors That Affect It

11. Capital Market Sharia Expert

Capital market sharia experts are individuals who have knowledge and experience in the field of sharia. Capital market sharia experts are also defined as business entities whose management and employees have knowledge and experience in the field of sharia.

Capital market sharia experts provide advice and supervise the implementation of sharia principles in the capital market in the company’s business activities and provide a statement of sharia compliance for sharia products or services in the capital market.

This is information about the definition and types of capital market instruments. It can be said that capital market instruments are all securities or securities traded on the exchange.

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