Unless the assets underlying the plans allocated to you are not listed on a regulated market, being a beneficiary of a share ownership plan exposes you to the stock market. Read on for a detailed explanation.

Trading and the financial markets

The financial markets are a way of financing the economy. They enable private and public companies, local authorities and the State to obtain funds to finance their investments by directly or indirectly calling on savers.

“New” securities are made available to investors on the primary market. These may be newly created securities (known as “issues”) or securities sold when new companies are listed (under “initial public offerings”).

The securities are subsequently traded on the stock markets, which make up the secondary market.

The activity of the financial markets in France is regulated by the Autorité des marchés financiers (financial markets authority - AMF), an independent body. This authority’s role is to ensure that :

  • savings invested in financial instruments, and any other investment offered to the public, are protected;
  • investors are kept informed;
  • markets in financial instruments function properly.

Basic rules for investing in the stock exchange

Before entering into transactions on financial markets, investors should be aware that they carry risks that could lead to financial losses. A financial instrument’s past performance is in no way a guide to its future performance.

Here are some general rules for investing.

  • Define your objectives

    Before taking any investment decision you should consider both your short - and long-term plans.
    The choice of a financial product must always take into account two key, indissociable factors :

    • the investment’s duration;
    • the level of risk accepted.

    Return is always risk-related; you can only achieve exceptional investment performance by taking a corresponding risk.
    You should therefore restrict cash investments to risk-free assets.

  • Be available

    If you are managing your investments yourself, you need a minimum level of training in how stock markets work. You must regularly monitor your securities portfolio.

  • Know how to limit investments

    We advise you not to invest any money that you may need in the short term in the stock market. If you need that money, you may be forced to sell against your will and at the worst possible time.

  • Stay informed

    Avoid emotional responses. Only invest in assets that you have taken the time to research.

  • Diversify your risks

    Diversify your investments by business sector, company and region. You will thereby avoid the risk of holding a position in a single asset that represents a significant proportion of your overall investments.

  • Focus your efforts

    Avoiding having too many assets in your portfolio will make it easier to monitor. And not investing in an excess of low-value lines will allow you to avoid burdensome fixed costs.

  • Buy well and sell well

    Limit the price of your orders and know how to take profits.

  • Play the long term

    The stock exchange offers good prospects for returns over a long-term investment horizon (more than five years) - provided that your diversify your portfolio.

Market products

Market products accessible via share ownership plans can be divided into various types of financial instrument.

  • Shares

    A share is an equity instrument representing a fraction of the capital of the company that issued it. This type of security entitles the holder to participate in shareholders’ meetings, to be informed of the company’s progress and to receive dividends. A share is not redeemable and as such does not have an expiry date.
    The value of shares changes according to various factors, the most commonly recognised of which are the company’s future financial results, the level of interest rates, the economic situation and the stock market environment.

  • Observations on risks

    The shareholder is tied to the company’s growth but also to its risks. The risk is limited to the amount invested. The income derived from shares consists of dividends and, in the event of the shares’ resale, any capital gains. However, investing in shares always carries the risk of not receiving dividends as well as incurring capital losses. Seeking quick profits through short-term purchases or speculative transactions increases that risk.

  • Complex financial instruments

    The following are considered to be complex products :

    • bonds and other debt securities that contain an embedded derivative,
    • shares admitted to a non-regulated market such as Euronext Access or certain Alternext private investment compartments,
    • financial instruments giving the right to acquire or sell another financial instrument,
    • financial contracts formerly known as forward financial instruments,
    • financial instruments that may carry an actual or potential debt for the client,
    • financial instruments that are difficult to trade and of which the prices are not available to the public and do not correspond to market prices,
    • financial instruments that are subject only to information that is confidential and not understandable by an average professional client.

    For example, traditional equity derivatives include :
    Equity options, which are tradeable securities that entitle their holder to invest in new shares up to a given date (maturity) and at a set price (exercise price).
    Share subscription rights, which are tradeable rights attached to old shares that entitle their holder to invest in new shares in the company.
    Warrants, which are securities tradeable on the stock exchange that give their holder the option to buy (call warrants) or sell (put warrants) an underlying security such as a share or an exchange rate at predetermined conditions.

  • Observations on risks :

    Complex financial instruments, in particular derivatives with an underlying, may carry high risks for the investor. Depending on the investment vehicle and strategy, this may result in the total loss of the capital invested, or even losses greater than the initial amount invested, sometimes within very short time frames.
    It is essential for users of these vehicles to have a good knowledge of the products and how they work, and to be able to monitor their movements closely.

Observations on foreign assets (or assets listed in a different currency to the investor’s local currency  – Example : British investor holding shares listed in euros) and currency risks :
Changes in the prices of financial instruments may be amplified or reduced by fluctuations in their listing currency. Investors are therefore advised, when investing in financial instruments quoted in currencies other than their own, to have a good understanding of the relevant exchange rate mechanisms and to take into account the outlook for movements in the reference currency.

Stock market orders

  • Listing and settlement procedures

    The most liquid stocks are quoted continuously and have official opening and closing prices. The least liquid stocks are quoted only on official calculation.
    Continuous quotation markets record transactions on an ongoing basis as soon as sellers and buyers agree on a price. This results in an unlimited number of price quotes during a session.
    By contrast, official calculation quotation is a periodic quotation method. Initially, bids and offers accumulate with no quotation taking place. At the time of quotation, the bids and offers are matched and the price at which the largest exchange of securities is possible is used as the quotation price. Depending on the market, this calculation may or may not be automated and may occur one or more times per day.
    Transactions processed on behalf of beneficiaries of share ownership plans are carried out on a spot basis, i.e. settled immediately.

  • Stock market orders

    A stock market order contains mandatory fields :

    • the direction of the transaction = purchase or sale;
    • the nature of the securities = the security’s ISIN;
    • the number of securities = quantity;
    • the settlement method = spot;
    • the validity = day or end-of-month;
    • the price conditions = at a limited price or at the market price.

    Since the transmission of an order is instantaneous, its execution may be immediate. An order can only be cancelled if it has not yet been executed.

  • Validity of orders

    Orders on the French stock exchange have an expiry date : the validity date. Various options are possible.

    • Day validity : the order transmitted is only valid for the day’s session. If it is not executed by the end of a session it expires, requiring, if appropriate, the entry of a new order;
    • End-of-month validity : the order will expire on the last business day of the current stock market month.
  • Price conditions
    • Limit order

      This type of order is both the simplest and the most common. It reflects the maximum price a buyer is prepared to pay or the minimum price at which the seller is prepared to sell.
      During trading, these orders remain on the order book until a counterparty accepts the related price conditions.
      A limit order is used to control the execution price and therefore to protect the issuer against price fluctuations. It may be partially executed.

    • Market order

      This is an order with no specified price limit.
      When the market opens, this type of order takes precedence over all other types of order and is executed in the maximum quantity available against orders in the opposite direction. It replaces the old “at any price” order but, unlike that order, may be partially executed.
      It is not possible to use this order to control the execution price. There is a risk of a significant delay with regard to illiquid stocks or stocks quoted by official calculation.

For further information : https://www.banquetransatlantique.com/fr/informations-reglementaires/directive-mif.html.