Concept, functions and structural organization of the financial market. “financial markets” Financial market and financial organizations

Before we start studying Finnish. markets, it’s time to say a few words about the format of the articles and their purposes. There is a lot of theoretical information available on the Internet, but from a practical point of view, most of it is not particularly useful for each specific case. Therefore, these articles will describe only what is important for independent development and for obtaining long-term results in practice. Some points will not be specified due to their lesser significance, but if you wish, you can find them yourself through an Internet search.

From previous articles about development in trading, we already know that in order to develop as effectively as possible, we need to have as much accurate information as possible available. So let's start with some basics of corporate finance and economics.

We will move from larger (Big picture) to smaller. First, let’s find out what markets there are, what kind of participants they have, and what they are. Let's get a comparison between these markets, learn about their disadvantages and advantages.

This is very important in order to answer the question - which of them can you compete with and who can you make money on? Unfortunately, many people, without understanding this, enter those market segments where they are unable to compete with anyone at all, which is why they lose everything.

Next, in a segmented manner, we will begin to study those markets that are best suited for us to make a profit. And ultimately, we will study specific strategies and mechanisms that you can use to make a profit.

Let's not overload ourselves with economic theory and complex definitions. Where possible, we will consider everything in simple and logical language.

It is also worth noting that a professional trader is only one who fully has professional knowledge and experience in all major financial markets. Many call themselves professionals, although they have little understanding of even several markets.

Introduction

At all times, market relations have been an integral part of human life. Since the beginning of time, people exchanged something with each other, bought, sold, gave, stole, etc.

Over time, the number of types and types of items included in this circulation has steadily increased. Thus, different types of markets have been formed, corresponding to a specific product. Today there are many different markets: financial, markets for goods, services, information, raw materials, or for example the market for scientific and technical developments, patents, licenses, know-how, etc.

At this stage, it is very important to remember that absolutely all of them, to one degree or another, are directly or indirectly related to each other and influence each other. This important point will be useful to us in the future.

We are interested in financial markets because... it is on them that we can invest or engage in trading, i.e. various speculations with financial instruments in order to make a profit.

Financial markets

Financial markets is the structure of economic relationships between participants in these markets. These relationships often come down to the purchase/sale of financial instruments (raw materials, currencies, shares, etc.) for various purposes.

There are many different classifications of financial markets according to different criteria (type of goods, method of trading, etc.). Below is the most optimal classification in my opinion.

The main financial markets are the following (alternative names are given in parentheses):

Stock market (securities market, stock market, equity market)

Various securities are traded here: stocks,shares), bonds), depositary receipts (depositary receipt. ADR, GDR, RDR), etc. and so on.

Derivatives market (derivatives market)

Futures, options, swaps, forward contracts, credit default swaps, etc. are traded here.

Currency market

They trade currencies here. Includes Forex– foreignexchange), spot (cash) market.

Commodity market

They sell raw materials here. (wheat, oil, gold, corn, etc.)

Capital market

This is a system of economic relations regarding the provision of funds for a period more of the year. This market includes the above-mentioned stock, derivatives and foreign exchange markets (since they contain moments of provision of funds by one market participant to another). + includes insurance markets and credit markets

Money market

Almost the same as the capital market, only with the provisionfunds for a period before of the year. This includes the markets for short-term securities, interbank loans and eurocurrencies.

In general, all financial markets can be divided into two types:

Exchange

They have a centralized structure and a place through which all operations take place. These are markets in which people trade standardized financial instruments that are determined by the exchange. For example, the Chicago Mercantile Exchange (CME - Chicago Mercantile Exchange http://www.cmegroup.com/) or the New York Securities Exchange (NYSE https://www.nyse.com/).

OTC

They have a decentralized structure. They are a network of dealers scattered around the world. For example, part of Forex is an over-the-counter market.

It is also worth noting another classification of markets, according to the method of trading on them. The fact is that for most of the existence of exchanges, traders in financial instruments met on the trading floor of the exchange and, with the help of shouts and a complex system of signals, negotiated the transactions they wanted to conclude. It is called open auction.

With the development of the Internet and computer technology (second half of the 1990s, early 2000s), it became possible to make transactions not on the stock exchange floor, but from your computer. Progress has led to the fact that most transactions now take place via computers and the Internet. Such trades are called electronic. Most of the time we will be looking at them, because... Almost the entire amount of money in the world is now exchanged in this way.

We will get acquainted with each of the announced markets in more detail in the following articles.

The financial and monetary sector, as an independent element of the money economy, forms financial market.

World financial market is a set of national and international markets that ensure the direction, accumulation and redistribution of monetary capital between market entities through financial institutions in order to achieve a normal balance between supply and demand for capital.

The monetary sector, which includes finance and credit, is a specific market with its turnover and income. The global financial market shows society Financial services, supplying him with money at the right time and in the right place. In other words, a specific product in the financial market is. As a commodity, money circulates in such sectors of the global financial market as the credit, securities, foreign exchange, insurance, etc. (Fig. 23).

The global financial market, in its economic essence, is a system of certain relations and a unique mechanism for the collection and redistribution of financial resources on a competitive basis between countries, regions, industries and institutional units.

The financial market consists of a number of sectors: investment, credit, stock, insurance, currency.

Rice. 23. Financial market structure:

(stock market)
Investment market

In the financial market, the object of purchase and sale is. However, there are fundamental differences in transactions in different sectors of the financial market. If on the credit market money is sold as such, i.e. they themselves are the object of transactions, then on the stock market, for example, the rights to receive monetary income, already created or future, are sold.

The financial market is not only a means of redistributing monetary resources in the economy (on payment terms), but also an indicator of the entire state of the economy as a whole. The essence the financial market is not simply the redistribution of financial resources, but primarily in determining the directions of this redistribution. It is in the financial market that the most effective areas for applying monetary resources are determined.

The structure of such a financial market can be presented as follows:

Financial market instruments

Financial instruments— these are financial obligations of economic entities documented in accordance with current legislation.

Currently, in developed market economies there is a clear tendency towards the merger of various financial intermediaries, as well as towards the diversification of their operations. The development of financial intermediation contributed to the emergence of a unique economic phenomenon - financial instruments, which include:

IOUs
credit cards
insurance policies
certificates
various certificates giving the right to receive cash income, etc.

Financial instruments are either registered or bearer.

41.Financial market, its structure and functions.

Financial market- this is a set of monetary resources of an economic system that are in constant motion, i.e. in distribution and redistribution under the influence of the changing ratio of supply and demand for these resources on the part of economic entities. The financial market represents a mechanism that ensures the mobilization of all available cash capital and funds and the distribution of these funds across sectors of the economy on the terms of urgency, payment, and repayment.

The financial market is divided into:

1. The money market is a market for relatively short-term transactions (up to a year), in which liquidity is redistributed, i.e. free cash flow. The money market mainly serves the movement of working capital of enterprises and organizations, short-term liquidity of banks and the state. The function of the money market is the regulation of the liquidity of all economic participants. systems and the economy as a whole.

2. The capital market is a market in which free capital is redistributed and invested in various profitable financial assets. The capital market refers to all lending transactions with a maturity of 1 year or more. The functions of the financial market are the formation and redistribution of capital of economic entities, the exercise of corporate control (through the movement of stock prices), the investment of capital for the development of production, the implementation of speculative transactions (which are a tool for achieving market balance).

The money market is divided into:

1. The market for short-term bank loans is a market that serves enterprises and the population; in this market, banks provide enterprises and organizations with the missing funds necessary to make payments and complete the circulation. The main institutions are commercial banks.

2.The interbank loan market is a market in which banks borrow funds from each other in order to maintain their liquidity, i.e. in order to secure its obligations. Therefore, most often loans are ultra-short-term in nature - 1,7,14 days - up to 3 months. The main institutions are commerce. banks and the Central Bank - as the lender of last resort.

3. Short-term securities market - the market on which short-term securities are traded, the main types of securities: government short-term securities. securities, and short-term debt securities of various entities (usually in the form of a promissory note). Main institutions: commercial banks, brokerage, dealer, insurance. companies, exchanges

4.The foreign exchange market is a market for which currency purchase and sale transactions are carried out both in cash and non-cash form. Main institutions – commercial banks and currency exchanges

5. Gold market – a market where transactions (cash, wholesale, etc.) with gold are made, incl. with gold bars

The capital market is divided into:

1. The market for long-term loans is loans that are provided by banks or go through other financial intermediaries

2. The market for long-term securities, which is divided into the capital financing market (this is any agreement or obligation under which an enterprise receives funds for investment in exchange for granting the right of equity participation in the ownership of this company (financial instrument - share)) and to the loan-based financing market (concluding an agreement under which an economic entity receives funds for investment in exchange for an obligation to pay this amount in the future with an agreed interest (financial instruments - bills, bonds)).

The RCB is simultaneously part of both the money and financial markets. RCB is 1) a set of social-economic. relations regarding the issue and circulation of securities. 2) a functional-institutional mechanism for the redistribution of free funds and capital between economic entities, facilitating the transformation of savings into investments through the purchase and sale of financial assets. obligations in the form of securities.

The securities market is divided into primary and secondary, exchange and over-the-counter. Primary securities market is a market servicing the issue (issue) and initial placement of securities among investors. Secondary market - intended for the circulation of previously issued securities. Stock market is a securities market operated by stock exchanges. Over-the-counter market - intended for the circulation of securities that have not received admission to stock exchanges.

In modern conditions, a new financial sector has emerged. market – derivative financial instruments market (DFI), cat. combines a set of economic relations in the field of forward trading of financial instruments certifying rights to resources or rights to rights to resources. RPFI is a market for futures contracts (futures, forwards, options, swaps).

A forward contract is an agreement between two parties to purchase (sell) a specified quantity of an asset at a specified date in the future at a price determined at the time the contract is concluded.

A futures contract is an agreement between two parties, concluded on an exchange, to purchase (sell) an asset in the future at a price set at the time of conclusion. This is a standardized contract, it is drawn up on the exchange.

An options contract is a security that gives the option buyer the right (but not the obligation) to buy (call) or sell (put) some commodity in the future at an agreed price.

A swap is an agreement between two or more parties to exchange a series of cash flows over a specified period of time in the future.

Stock market = RCB + RPFI

Functions of the financial market:

1. The FR mobilizes free capital and funds, where they are available in abundance, and distributes them to those areas of the industry and enterprise that need additional capital. That is, it ensures the flow of capital between sectors of the economy.

2. Formation of prices for financial assets.

3. Informational. It consists in the fact that the situation on the financial market provides investors with information about the economic situation in the country and gives them guidelines for investing their capital.

4. The financial market converts into capital those funds that by their nature are not capital, and this makes it possible to increase savings and investments.

In general, the movement of capital in the financial market contributes to the formation of an efficient and rational economy, since it stimulates the mobilization of free monetary resources in the interests of production and their distribution in accordance with market needs.

Thus, the financial market is presented as an effective mechanism for the functioning of the economy, a tool for mobilizing financial resources and savings of the population, and optimal redistribution of funds.

Financial markets are institutions that ensure 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 on for more details about what kind of financial markets there are and participants in financial markets.

Classification

By purpose, markets can be divided into:

currency;
monetary;
debt;
urgent;
commodity;
stock.

Banking sector

The foundation of the system is short-term investments. When making transactions, participants exchange liquid financial instruments. Market fundamentals assess the level of risk. This segment is highly dependent on the monetary policy of leading banks and on If the market situation worsens, credit institutions view the risks as high and increase rates on loans provided.

Central banks, as the main participants in the financial market, have a monopoly right to issue banknotes, accumulate reserves, and exercise supervision over the entire system.

Specialized credit institutions serve clients in a specific industry or carry out hotel operations.

Universal banks, as participants in the global financial market, provide a wider range of services: cash settlement services, attract deposits, trade and store securities, and invest funds.

Other financial and credit institutions (depositories, pension, insurance companies) mobilize savings of the population, provide mortgage loans, and carry out transactions with stocks and bonds.

Capital Market

This is where long-term instruments come into play. Issuers issue bonds to financial markets. Participants in financial markets assess the reliability of the borrower, which is expressed in the yield of the Central Bank. can be used for various purposes, for example, for financing. The higher the risks, the higher the cost of borrowing. Central banks can stimulate the economy by lowering bond yields. That is, the conditions for the borrower may change for the better after the investment. The presence of developed capital is considered the main feature of a progressive economy.

Stock market

Its main task is to attract money for business. Business entities place shares, selling part of their companies to investors. Central banks enter financial markets. Participants in financial markets, assessing the development prospects of an organization, decide to buy or sell shares.

FOREX

The interaction of the three financial markets is carried out on the basis of the foreign exchange market. To carry out transactions, participants need to purchase the currency of the country in which they plan to invest. If an investor wants to invest in bonds, he should first buy the New Zealand dollar.

World market

Here the accumulation of available funds between individual countries is carried out. In the primary market there is a redistribution of capital between investors and borrowers, in the secondary market there is a change of owners.

The world market is divided into international and national. The first one means:

the totality of transactions of residents in national currency;
borrowings made by financial market participants in foreign currency.

All operations are carried out with the participation of a resident bank. The international financial market refers to transactions in foreign currency that are not subject to direct government regulation. In the banking segment, transactions occur between credit institutions to provide short-term loans. Financial market participants can also obtain loans and trade securities. Borrowings are provided for both short-term (up to 3 months) and long-term periods, at a floating interest rate. It includes the cost of raising funds for a specific borrower and the margin.

Participants in the international financial market

Lenders, investors, the government and intermediaries act on the supply and demand side. The population turns part of its income into savings, which it invests in financial markets. Participants in financial markets, if provided with an appropriate mechanism, can become a source of growth for the state. Legal entities issue securities. All these entities are legally divided into private individuals and industrial participants. Enterprises can not only issue securities, but also invest temporarily free funds in them.

The government usually acts as a borrower that issues debt to finance budget deficits. It also regulates operations. Through laws and regulations, it influences the behavior of participants and guides the development of the market. If there is a surplus of funds, 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 whom the savings of the population are converted into loans, which makes it possible for enterprises to satisfy the need for funds.

Brokers

These participants in the international financial market are involved in assisting in the implementation of 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 in both the organized and over-the-counter markets. A broker's income is commission payments from concluded transactions. The client signs an agreement with a professional participant, which stipulates all types of assignments. Based on this document, the broker performs operations on the market, independently selecting the securities. At any time, the client can suspend the activities of the intermediary. The broker is obliged to notify the client about all operations and transfer to him the income from the sale of securities within the period specified in the document. All transactions are subject to mandatory registration.

Dealers

These market participants carry out transactions in financial instruments at their own risk and in order to make a profit. Dealers publicly announce transaction prices and undertake to complete a reverse transaction under 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. In this case, the same organization can be a dealer, broker, issuer, or institutional investor. This group most often includes:

commercial banks;
investment companies;
funds;
underwriters;
insurance organizations;
PF and other credit and financial institutions.

Dealers perform the following functions:

Guardians

Depositories are participants in the financial market of securities that provide services for storage, recording of ownership rights and movement of securities to shareholders. The contract with a professional participant must contain the following conditions:

the subject of the transaction is the provision of services for custody of securities or registration of rights;
the procedure for transmitting information about the disposal of certificates;
validity;
procedure for payment for depository services;
frequency of reporting;
duties of the depositary.

All entries are recorded in the client's custody account.

Registrars maintain a listing of owners of registered securities. A fee is charged for recording, storing information, and making changes to the register. Only legal entities can obtain a license to carry out such activities. The register is a list of owners of securities, which indicates the number and categories of documents that belong to shareholders on a certain date. An agreement for the provision of services for a fee is concluded with one registrar. But one professional participant can maintain listings for an unlimited number of issuers. Owners and holders of securities must promptly provide information to the register maintenance system. If the number of shareholders exceeds 500, the listing holder must be a large specialized organization. The main responsibilities of the participant are the timely provision of listings and maintenance of personal accounts of owners and holders.

Clearing organizations

These participants in the Russian financial market collect, check and correct information about the Central Bank for accounting purposes, and carry out settlements between entities. In the most general sense, the Clearing House is a specialized banking-type institution that conducts cash settlements between trading participants. In order to reduce the risk of non-execution of transactions, clearing companies create reserve funds. They are created in the form of a closed joint stock company. To carry out activities they must obtain a license from the Central Bank. The income of such organizations is formed from:

Other subjects

The following RCB members perform support functions.

1. Self-regulatory organizations are voluntary associations of stock market participants with the aim of protecting the interests of the owners of the securities.

2. Manager - a financial market participant who, on his own behalf, manages the securities and the holder’s funds (for a fee for a certain period).

3. Information institutions - institutions that provide clients with services for processing and disseminating market information about securities market entities, current exchange rates, indices for compiling reviews and trends.

4. Trade organizers are professional financial market participants who enter into transactions with the Central Bank. They provide the following information to any interested party:

rules for admission to trading;
terms of transactions;
rules and procedure for registration and execution of transactions;
price restrictions;
procedure for making changes to the listing;
list of securities admitted to trading.

5. Jobbers - consultants on the problems of market market conditions. The scale is constantly expanding, operations are becoming more complex. Depositories hold a large number of securities of different issuers. Jobbers not only evaluate the quality of already issued shares, but also help issuers place new certificates. They advise on proposed sales rates, determine the prospects for the development of economic sectors, and analyze tax policy.

The question of what financial markets are can be confusing because it is defined in many terms. These include capital markets and even simply “markets.” A market is a place where two parties engage in transactions of goods and services in exchange for money. The two parties involved are the buyer and the seller. In a market, a buyer and seller enter a common platform where the buyer purchases goods and services from the seller in exchange for money. With the advent of electronic trading systems, financial markets can now be structured in many different ways. Historically, they were physical meeting places where traders came into face-to-face contact and trading took place based on prices set in the market. Today, many financial markets have lost this dimension. Instead, prices are displayed on a network of computer screens and assets are bought and sold with a single click or without any human intervention. In such cases, the market becomes increasingly virtual as physical proximity between traders is no longer necessary to begin trading assets.

Despite this change in the physical configuration of financial markets, the rationale for creating financial markets remains the same as ever. Financial markets exist as a means of redistributing risk from riskier to less risky. Some risk is associated with owning all financial assets, as the value of those assets may depreciate. The riskier asset owners are, the more they will be willing to use financial markets to find an intermediary willing to take that risk on their behalf. This will certainly not be an exercise in futility. The intermediary's willingness to accept part of the risk embodied in the asset must be rewarded by payment of a fee.

This is, for example, the principle by which money grows in the capital market to provide resources for investment in new productive capacity. An investor with cash reserves may choose to invest that money in an asset that has minimal risk to it - say, an interest-bearing bank account, which is an extremely safe asset since the bank has almost zero risk of default. Alternatively, these investors can make their cash available to entrepreneurs through the capital market. Entrepreneurs will approach the capital market to raise additional resources when they have insufficient cash reserves of their own to finance their activities, and they will seek investors to bear some of the inherent risks of their entrepreneurial activities. Investors who make their cash in this way explicitly require compensation, that is, payment for the additional risks they take, and this compensation takes the form of higher returns than would be available from less risky investments. The entrepreneur must pay a return on top of the prevailing interest rate that the investor would earn from a simple bank account.

A smoothly functioning market environment theoretically exhibits a symmetrical distribution of risk aversion around a mean and will be populated by an equal number of savers and borrowers. In practice, however, the situation is quite complex due to the dominance of the speculative motive for holding assets.

What is a financial market

Financial market is any market involving securities, stocks, bonds, currencies and derivatives. Some financial markets are small with little activity, while others trade trillions of dollars of securities daily. Here, buyers and sellers engage in asset trading. Financial markets are typically driven by transparent prices, basic trading rules, costs and fees, and market forces that determine security prices. Financial markets can be found in almost every country in the world. The place where individuals engage in any financial transaction refers to the financial market. Money markets, where large-scale short-term debt is organized, and capital markets, where long-term debt is traded, make up the market.

Securities include bonds and stocks, and commodities can be gold, silver and other metals or agricultural products such as coffee, cocoa, wheat, corn, etc. Alternatively, financial markets are places where savings from multiple sources are mobilized towards those who need funds. They are intermediaries who route money from savers or lenders to sellers or borrowers.

Basically, financial markets are concerned with attracting investors (lenders) and borrowers. Prices in financial markets are transparent and rules are set regarding trading, costs and fees. In business and financial English, the term "market" refers to a place where potential buyers and sellers come together to trade goods and services and between transactions. The financial market also refers to commodity exchanges. They can be physical locations or an electronic system. Corporations and governments are present in these markets to raise cash, businesses reduce risk, and investors seek to make money. Some financial markets are very astute, like exclusive clubs, and offer opportunities to participants with a minimum amount of money, knowledge of the markets, or a certain profession.

The financial market allows us to provide a non-problematic pool of risks, which in turn leads to an effective risk management structure. However, there is no destabilizing speculation in the financial market. To destabilize markets, speculators would have to buy assets for more than the prevailing price on the spot market and sell them for less. This strategy is a money loser, and the permanent losses that a destabilizing speculator will create are sufficient to clear the market environment of any such actor. However, speculative asset trading still dominates modern financial markets. In general, the return on an investment is considered to be directly proportional to the risks an investor bears in holding a particular asset. The higher the risk that an investment will not be profitable, the higher the expected return will be. Speculative positions are taken when seeking higher average returns. Investors will hedge rather than speculate if the returns to the two strategies were the same because hedging is a safer strategy than speculation.

However, in attempting to increase their expected rate of return, speculators must also accept the increased risk that returns may not be realized at all. Far from speculative financial markets, following the risk training pool model, they actually multiply the risks of owning financial assets by exposing the price of those assets to the vagaries of trading. Speculative financial markets do not present investors with a predictable price structure that minimizes investment risk. Instead, they offer a means of taking on additional risk through the uncertainty of speculative price movements in search of higher returns.

Speculative financial markets tend to function relatively smoothly as long as market participants remain confident that the price of the assets they hold represents fair value. However, such markets are also subject to a point during which this confidence evaporates. In such circumstances, there is a flurry of sales activity. This is caused by investors trying to switch off assets that are unlikely to generate returns. But everything it does introduces risks that are built into assets that are traded speculatively. A market that lacks confidence is one in which there is no escape from the extended investment risks associated with speculative trading.

The financial market facilitates the mobilization of savings and transforms them into the most productive uses. This helps determine the price of a security. Frequent interaction between investors helps in determining the value of securities based on their supply and demand in the market.

Types of financial markets and their roles

There are several types of markets:

Capital markets. Any institution or corporation requires capital (funds) to finance its activities and make its own long-term investments. To do this, the company receives money by selling securities in the company name. They are bought and sold in the capital markets.
Stock markets. Provides the opportunity to buy and sell shares of publicly traded companies. They provide companies with access to capital with a piece of ownership in the company and profit potential based on the company's future performance.
Bond markets. It is a debt investment in which the investor lends money to an enterprise (corporate or government) that borrows the funds at a fixed rate. Bonds are used to finance projects. In nominal terms, there are many more global stock markets. The main categories of bonds are corporate, municipal and treasury bonds, notes and bills.
Money market. The money markets for securities include other documentation such as deposits, bankers' acceptances, commercial paper, Eurodollars, and federal funds. Money market investments are also called cash investments because of their short maturities. This market is used by a wide range of participants, from a company raising money to selling commercial paper to the market to an investor. This market is seen as a safe place to park money due to the highly liquid nature of the securities and short-term maturities. Because they are extremely conservative, cash securities offer lower returns. But there are risks in this market that any investor should be aware of, including the risk of default on securities such as a commercial document.
Cash or spot market. Investing in cash is a very complex process, with the potential for both large losses and large profits. In the cash market, items are sold for cash and delivered immediately. Similarly, contracts bought and sold on the spot market are immediately effective. unlike other markets where trading is determined by forward prices. The cash market is complex and sensitive. The very nature of the products traded requires access to far-reaching detailed information and a high level of macroeconomic analysis and trading skills.
Derivative markets. A derivative is called that for a reason: its value is derived from its underlying asset or assets. A derivative contract is a contract, but the price of the transaction is determined by the price of the underlying asset. Examples of common derivatives are forwards, futures, options, contracts for difference. These tools are not only complex, but they are also strategies offered by participants in this market. There are also many derivatives in the over-the-counter (non-market) market that professional investors, institutions and hedge fund managers use to varying degrees but play a minor role in private investing.
Interbank market. This is the financial system and the trading of currencies between banks and financial institutions. Trading takes place on the foreign exchange market.

Until recently, trading in the foreign exchange market was primarily the domain of large financial institutions and extremely wealthy individuals. The advent of online trading has changed all this, and average investors can now buy and sell currencies easily with the click of a mouse through online brokerage accounts.

Over-the-counter market. This type of aftermarket is also referred to as the dealer market. The term "over-the-counter" refers to stocks that are not traded on an exchange. None of these networks are exchanges. In fact, they describe themselves as providers of cost information for papers. Most of the securities trading this way are from very small companies.
Third and Fourth markets. They involve significant volumes of shares that must be traded per trade. These markets engage in transactions between broker-dealers and institutions through over-the-counter electronic networks.
Derivatives market. The derivatives market is a financial market that trades securities that derive their value from their underlying asset. The value of a derivative contract is determined by the price of the underlying item. This financial market trades derivatives.

Primary and secondary markets

The primary market issues securities on the stock exchange. Financing is included through debt- or equity-based securities. Primary markets, also known as "new issue markets," are facilitated by underwriting teams that consist of investment banks that will set an initial price range for a given security and then oversee its sale directly to investors.

Financial products, including loans, mortgages, company shares and insurance, are bought and sold in the primary and secondary financial markets. Financial products and securities are first issued in the primary financial market. Secondary markets exist that allow buyers and sellers to resell their products and contracts to a third party. The most well-known secondary financial market is the stock exchange, which allows you to trade shares of a company that have been issued in the past.

All financial markets have primary and secondary elements. For example, in order to buy a car, a person may take out a loan from a high street bank. At some point after this, the lending bank may sell the contract to another bank, which will pay the first bank a fee or rate and then collect payments from the original borrower. Similarly, a car owner can insure it with a local insurer, who collects the down payment (premium). The insurer may then sell some of the risk to a reinsurer, who may also sell some of that risk to another insurer.

In primary markets, the issuing company or group receives cash proceeds from the sale, which is then used to finance the business.

Primary markets may provide for increased volatility compared to secondary markets because it is difficult to gauge demand for a new security until several days of trading have occurred. In the primary market, the value is set in advance, whereas in the secondary market, only fundamental forces determine the price of security. In any secondary market trading, the cash proceeds are directed to the investor and not directly to the founding company/organization.

Functions of financial markets

All these financial institutions and markets help firms raise money. They can do this by taking out a loan from a bank and repaying it with interest, issuing bonds to borrow money from investors that will be repaid at a fixed rate, or offering investors partial ownership in the company and claiming its residual cash flows in the form of inventories.

Financial market prices may not be indicative of a stock's true intrinsic value due to macroeconomic forces such as taxes. In addition, security prices rely heavily on information transparency to ensure efficient and appropriate prices set by the market.

The financial market can be physical or virtual over a network (for example, the Internet). Here, people who have a particular product or service they want to sell (supply) interact with people who want to buy it (demand).

Prices in the financial market are determined by changes in supply and demand. If market demand is stable, an increase in supply in the market will lead to a decrease in market prices and vice versa. If market supply is stable, an increase in demand will lead to an increase in market prices and vice versa.

Manufacturers advertise goods and services to consumers in the financial market in order to create demand. In addition, the term "market" is closely related to financial assets and securities prices (for example, the stock market or bond market).

Types of shares

Stock- the payment of dividends is directly proportional to the profit received by the organization. The higher the profit, the higher the dividend, the lower the profit and the lower the dividend. In share shares, dividends are paid at a floating interest rate. There are several types of shares in the financial market:

Preference shares. They prefer to pay dividends and are called preferred shares. Shareholders have a fixed dividend rate in case of preferred shares.
Founding shareholders. Shares owned by the management or founders of an organization are called founders' shares.
Bonus promotions. Bonus shares are often issued to shareholders when an organization generates surplus profits. Company officials may decide to pay additional profits to shareholders either in the form of cash (dividends) or to issue them a bonus share. Bonus shares are often offered by organizations to shareholders free of charge as a gift in proportion to their existing shares with the organization.

To buy shares you need to find a good broker for yourself. He should be knowledgeable about the stock market. To invest in stocks, you need to open an online trading account. An individual needs to have his/her bank account card, other necessary identification documents, address proof, and so on.

The influence of financial markets on economic indicators

According to the Federal Reserve Bank, well-developed, properly managed financial markets play a critical role in promoting the health and efficiency of a nation's economy. There is a strong, positive relationship between development and economic growth. Financial markets help efficiently channel the flow of savings and investment into the economy in ways that promote capital formation and the production of goods and services. A combination of well-developed financial markets and institutions, as well as a variety of financial products and instruments, meets the needs of borrowers and lenders and, therefore, the overall economy. The financial market starts with savings. A savings account provides a safe and convenient place (a bank) to keep money you don't need immediately, plus you earn interest on it.

However, savings account money doesn't just sit in a giant safe at the bank. Banks use this money to help other people and organizations buy houses, cars, go to college, or borrow money for hundreds of different purposes. When banks lend money, they use all the money they deposited with it. In this way, banks act as financial markets for money. Bank loans can promote economic growth, but one day the money will have to be repaid, plus interest and fees to cover administrative costs.

People use money for investment. When we buy bonds, we are providing credit to companies or governments. When we buy shares, we are buying part of the ownership of companies. Companies can use this money to grow, buy new equipment, increase advertising spend, hire new employees, or research new products. In financial markets, investors seek to buy at the lowest price available, and sellers seek the highest price available.

Money can be invested in many different types of markets, including exchanges, over-the-counter markets, foreign exchange markets, commodity markets, and futures markets. Investments today can be purchased twenty-four hours a day. When the New York market opens, the Tokyo market has just closed and the London market is halfway through the business day. What happens in one financial market affects prices in all markets around the world.

Financial markets are extremely important to the overall health of an economy. With efficient credit and capital markets, borrowing and investment will be constrained and the entire macroeconomy could suffer. Financial markets often fail to develop in command economies and less developed countries, resulting in low levels of investment and low growth rates.

Financial market analysis

Market analysis is concerned with the performance of a particular market. The efficiency of a financial market depends on the efficiency of the total number of securities in this market. On a day when the market closes with most of its securities on the higher side, you can say he did well. This is reflected in the market indicator, which tracks the performance of sustainable securities that are traded in that particular market.

Some of the most famous stock market indices in the world are:

Footsie is London's financial market.
Dow Jones is a financial market in New York.
Hang Seng is the financial market of Hong Kong.
BSE Sensex is a financial market in Mumbai.
Nikkei - Tokyo financial market.
Nifty is the Indian national financial market.

The market index has become especially important in the modern market economy, which is very rapidly integrating on a global scale. Traders do not limit themselves to trading securities only in markets in their country of origin, but invest in a large number of markets around the world. With more and more investment firms going global, financial markets around the world are integrating on a scale never imagined.

As a result, market analysis has become a core activity both in and outside the market. For example, when the government of the country where a market is located announces a new policy measure aimed at deregulating a particularly stifling part of an industry segment, this can have a positive impact on the financial market. Financial market analysts cannot predict such factors and therefore the influence of such factors does not fall within the main scope of financial market analysis. However, most analysts leave some room for the impact of external factors on the market, and they do this equally for both positive and negative factors.

Market analysis has become a highly specialized activity limited to groups of experts known as technical analysts. who have a special interest in financial market analysis and market economics. The number of factors influencing markets is growing rapidly, and more and more analysts are delving into the situations that influence market behavior. But the advancement of technology in market analysis makes the task increasingly difficult due to the complexities of market analysis.

Some of the most important types of analysis affecting financial markets are:

Fundamental analysis.
Analysis of the securities market.
Technical analysis of the securities market.
Index analysis of moments.
Security momentum analysis.
Price chart analysis.
Market analysis.
Market trend indicators.

Conclusion

The financial market facilitates sales transactions, as well as between producers and consumers. Markets experience fluctuations and price shifts as a result of changes in supply and demand. These changes are driven by fluctuations in many variables, including, but not limited to, consumer preferences and perceptions, availability of materials, and external socio-political events (eg, wars, government spending, and unemployment).