Financial markets are institutions that provide the movement of funds between participants: the state, companies, investors. The goal of some is to obtain funds to finance tasks in the real sector, while others are to increase capital. Read more about what financial markets are, participants in financial markets, read on.
Classification
By objectives, markets can be divided into:
- currency
- cash;
- debt
- urgent;
- commodity;
- stock.
Banking sector
The foundation of the system is the money market for short-term investments. Making transactions, participants exchange liquid financial instruments. Fundamental market indicators measure the level of risk. This segment is heavily dependent on the monetary policies of leading banks and the US Federal Reserve. If the market situation worsens, credit institutions consider the risks as high and increase interest rates on loans.
Central banks, as the main participants in the financial market, have the monopoly right to issue banknotes, accumulate reserves, and oversee the entire system.
Specialized lending institutions serve customers in a particular industry or perform hotel operations.
Universal banks, as participants in the global financial market, provide a wider range of services: cash and settlement services, attract deposits, trade and keep securities, and invest.
Other financial and credit institutions (depositories, pension, insurance companies) mobilize the savings of the population, provide mortgage loans, carry out operations with shares and bonds.
Capital market
Here are long-term instruments. Issuers issue bonds to financial markets. Participants in financial markets evaluate the reliability of the borrower, which is expressed in the yield of the Central Bank. The funds raised can be used for various purposes, for example, to finance investment programs. The higher the risks, the higher the cost of borrowing. Central banks can stimulate the economy by reducing bond yields. That is, the conditions for the borrower can change for the better after investing. The presence of developed capital is considered the main sign of a progressive economy.
Stock market
Its main task is to raise money for business. Business entities place shares, selling part of their companies to investors. Central Banks fall on financial markets. Participants in financial markets, evaluating the development prospects of the organization, decide to buy or sell shares.
FOREX
The interaction of the three financial markets is based on the currency. To complete operations, participants need to purchase the currency of the country in whose financial assets they plan to invest. If an investor wants to invest in bonds of New Zealand, then first you should buy a New Zealand dollar.
World market
It accumulates available funds between individual countries. In the primary market there is a redistribution of capital between investors and borrowers, in the secondary - a change of ownership.
The global market is divided into international and national. The first is understood as:
- set of operations of residents in national currency;
- borrowings that financial market participants make in foreign currency.
All operations are carried out with the participation of the resident bank. Under the international financial market refers to operations in foreign currency that are not subject to direct state regulation. In the banking segment there are transactions between credit institutions for the provision of short-term loans. Financial market participants can also receive loans and trade the Central Bank. Borrowing is provided both for the short-term (up to 3 months) and for the long-term period, at a floating interest rate. It includes the cost of raising funds for a particular borrower and margin.
Participants in the international financial market
On the supply and demand side there are creditors, investors, the state and intermediaries. The population turns part of the income into savings that it invests in financial markets. Participants in financial markets, if there is an appropriate mechanism, can become a source of state growth. Legal entities issue securities. All these entities are legally divided into individuals and industrial participants. Enterprises can not only issue securities, but also invest in them temporarily free cash.
The state usually acts as a borrower who places debt obligations to finance the budget deficit. It also regulates operations. With the help of laws and regulations, it affects the behavior of participants and guides the development of the market. If there is an excess of funds, then the state can become an investor, that is, provide financial support to certain business entities.
Participants in the financial market are also intermediaries, thanks to which the savings of the population turn into loans, which enables enterprises to satisfy the need for funds.
Brokers
These participants of the international financial market are involved in assisting in transactions as an attorney or commission agent, that is, they make transactions on their own behalf or on behalf of the client, but at his expense. They operate both in the organized and over-the-counter markets. Broker's income is a commission payment from concluded transactions. The client signs a contract with a professional participant, in which he stipulates all types of instructions. Based on this document, the broker performs operations in the market, independently choosing the Central Bank. At any time, the client can suspend the activities of an intermediary. The broker must notify the client of all operations and transfer to him the income from the sale of the Central Bank within the time period specified in the document. All transactions are subject to mandatory registration.
Dealers
These market participants carry out transactions with financial instruments at their own risk and in order to make a profit. Dealers publicly announce transaction prices, undertake to make a reverse transaction with the specified conditions. Their income is formed from the difference in purchase and sale prices. Therefore, dealers are required to monitor the market situation. Only legal entities can obtain a license. Moreover, the same organization may be a dealer, broker, issuer, institutional investor. This group most often includes:
- commercial banks;
- investment companies;
- funds;
- underwriters;
- insurance organizations;
- PF and other financial institutions.
Dealers perform such functions:
- provide information on the issue of the Central Bank;
- fulfill customer orders;
- monitor the state of the securities market;
- drive buyers and sellers together.
Keepers
Depositories - participants in the financial market of the Central Bank, which provide services for the storage, accounting of property rights and the movement of securities of shareholders. The contract with a professional participant must contain the following conditions:
- Subject of the transaction - the provision of securities custody or rights accounting services;
- the procedure for transmitting information on the disposal of certificates;
- validity;
- payment procedure for depository services;
- frequency of reporting;
- depositary obligations.
All entries are recorded on the client’s “depot” account.
Registrars are listing owners of registered securities. For accounting, storage of information, making changes to the registry, a fee is charged. Only legal entities can obtain a license to carry out such activities. The registry is a list of owners of the Central Bank, which indicates the number, nominal value, categories of documents that belong to shareholders on a certain date. A contract for the provision of services for a fee is concluded with one registrar. But one professional participant can list an unlimited number of issuers. Holders and holders of securities must provide information in a timely manner to the registry system. If the number of shareholders exceeds 500, the listing holder should be a large specialized organization. The main obligations of the participant are the timely provision of a listing and the maintenance of personal accounts of owners and holders.
Clearing Organizations
These participants in the Russian financial market collect, verify and correct information about the Central Bank for accounting, and carry out settlements between entities. In the most general sense, the Clearing House is a specialized banking institution that conducts cash settlement services between bidders. In order to reduce the risks of non-execution of transactions, clearing companies form reserve funds. They are created in the form of a closed joint stock company. To carry out activities must obtain a license from the Central Bank. The income of such organizations is formed from:
- transaction registration fees;
- revenue from the sale of data;
- income from circulation of available funds;
- profits from the sale of their software;
- other income.
Other entities
The following participants in the securities market perform auxiliary functions.
1. Self-regulatory organizations are voluntary associations of stock market participants in order to protect the interests of owners of the Central Bank.
2. Manager - a participant in the financial market, who on his own behalf manages the Central Bank, the holder’s money (for a fee for a certain period).
3. Information institutions - institutions that provide customers with services for the processing and dissemination of market information about the subjects of the securities market, current exchange rates, indices for the preparation of reviews and trends.
4. Trade organizers - professional financial market participants who enter into transactions with the Central Bank. They provide the following information to any interested person:
- admission rules for bidding;
- terms of conclusion of transactions;
- rules and procedure for registration, execution of transactions;
- price restrictions;
- the procedure for making changes to the listing;
- list of securities admitted to trading.
5. Jobbers - consultants on the problems of market conditions for the securities market. The scale and structure of the market are constantly expanding, operations are becoming more complicated. A large number of securities of various issuers are located in depositories. Jobbers not only evaluate the quality of already issued shares, but also help issuers to place new certificates. They advise on issues of estimated selling rates, determine the development prospects of economic sectors, and analyze tax policy.