Financial market
Financial market
- The financial market is an economic relationship involving the movement
of money capital in various forms and securities. It is part of a system
of market relations and organically linked to the commodity and other
markets: land, natural resources, labor, housing and other real estate,
insurance, foreign exchange, technology, gold, etc.
- From a functional point of view of financial market - a system of
market relations, to ensure the accumulation and redistribution of temporarily
free funds of economic entities, banks and the state.
- The functioning of this market makes it possible to streamline and
improve the efficiency of many economic processes, especially investment.
This is achieved by a variety of equity instruments of the market, mainly
securities.
Functions of financial
market
- The main functions of the financial market are:
- - Regulatory, with the help, which the regulation of the market, whether
by public authorities, and from the self-regulatory organizations;
- - Information, implying equal and full access to information for all
financial market participants;
- - Distribution - treatment of financial market instruments provides
overflow of funds from one sector of the economy to another, from one
market participant to another, from one to another sphere of circulation,
thus contributing to the distribution of financial resources;
- - Commercial, suggesting that the operations on the financial market,
one way or another, bring income to all the participants of the transaction;
- - Pricing - the price of financial instruments on the market is formed
under the influence of supply and demand under free competition.
The structure
of financial markets
- Each country has its own characteristic structure of the financial
market that best reflects the content and features. Depending on the
purpose of analysis and the characteristics of individual financial
market segments in different countries have different approaches to
the classification of financial markets. The structure of the financial
market, which is characteristic for Kazakhstan, special emphasis is
placed on the following components:
The structure
of financial markets
- Money Markets. Since
the foundation of finance, one way or another, are the funds, money
market takes priority. Money in the various forms of its existence,
serving the entire circuit of committed transactions in the market and
are the original substance of any financial market.
- On the territory of the Republic of Kazakhstan
in circulation, the following transactions with financial instruments,
money market: the transfer of cash, issuing checks, issuing bills of
exchange or transfer by endorsement, the use of payment cards, the treatment
of promissory notes.
- The main functions of the money market:
- - The payment function - the market contributes
to the various transactions between the participants in the implementation
of operations;
- - Provision of commercial lending - a delay
of payment, executed cash obligation, that is, bill of exchange, enables
commercial lending businesses;
- - Accounting function, etc.
The structure
of financial markets
- Deposit market. As an
entity of any financial institution authorized to carry out its activities
in need of financial resources, that is, the sources of funds needed
to purchase buildings, equipment, payroll, etc. These costs can be financed
both by equity and through debt and borrowings, which constitute the
bulk of the contributions of various individuals and entities or deposits.
- At present, deposit operations acquired various
types and forms and significantly differentiated by country. However,
for each financial institution remains a priority task of attracting
investors and expand the deposit base as a primary source of credit.
Money, fulfilling the function of accumulation, are transformed into
deposits that are, in fact, nothing more than a cumulative savings of
the population, businesses, etc. deposits are understood by all clients'
deposits. Sources of funds that are placed on them, are very diverse.
This tool sets for corporate clients, government agencies and enterprises,
wage workers and employees who are temporarily not in use.
The structure
of financial markets
- Credit market. Credit
market - is the mechanism by which to set the relationship between businesses
and people in need of funding, as well as between businesses and the
public that they can provide under certain conditions. Through the credit
market is the accumulation, distribution and redistribution of debt
between the spheres of the economy in the process of reproduction, when
freed capital. He goes there in the form of loan capital through the
market, and then returns to the lender. The essence and role of credit
market determines its function. Functions specific to Kazakh credit
market: service trade credit through credit, attracting money savings
businesses, communities, states, as well as foreign clients, the accumulation
of funds directly into money-capital and use it as an investment for
the maintenance of the production process, ensuring the maintenance
of the state and the population as a source of capital to meet government
and consumer spending, and promoting the formation of powerful financial-industrial
groups.
The structure
of financial markets
- Foreign exchange market is the most important part of the financial
market. This is the mechanism by which to set the legal and economic
relationships between consumers and sellers of currencies.
- Currency - Any vouchers or monetary liabilities denominated in any
national currency unit and used in international payments. It is foreign
- in the form of bank notes, treasury notes and coins in circulation
and are legal tender in the respective foreign countries.
- Foreign Exchange - an exchange of currency of one country's currency
for another. The main currency market participants - banks, exporters,
multinational companies, investors, businesses and individuals.
- On the status of the currency is classified as follows: the national
currency - the currency of that State; foreign - currency of a foreign
state; Reserve - the currency of a State that has the international
status of the payment back-up.
The structure
of financial markets
- Securities Market (Capitalmarket) - an
essential component of the financial market, which are organized and
conducted the acquisition and sale of various types of securities.
- The classification of securities markets can
be carried out according to different criteria. For example, classifying
them by type of market, we find three types of securities market: the
stock market, bond market and the market Forex. Classifying the form of organization, we
OTC and exchange markets, and the nature of the movement of securities
- primary and secondary markets.
- The primary market securities is a sphere of
emission, distribution and sales, in other words, the primary treatment
of newly issued securities.
- The secondary market securities can be defined
as the place where the appeal that is bought, sold and resold to the
previously issued securities. Markets are just to the secondary market,
so the investor is most familiar with this type of wound securities.
- In addition, there are so-called third (thirdmarket) and
fourth ( fourthmarket) securities market
- The third market is trading in securities that
are registered on the stock exchange, but directly to the trade itself
is carried out on the curb.
- The fourth market is trading in securities
by means of electronic systems such as, for example, CrossingNetwork, InstiNet. This trade is conducted directly between
investors.
The structure
of financial markets
- Retirement market In its
activities, pension funds, organizations engaged in investment management
of pension assets and the custodian bank with respect to each other
guided by the position of custodian tripartite agreement, which details
the rights and obligations of each party and all the emerging relationship.
The relationship between the three parties to the legal retirement services
is as follows: In accordance with the agreement on pensions between
pension fund and pension contributions contributor, enter the recipient's
bank-custodian with whom the fund custodian signed a contract on a specially
opened for the investment of pension the fund.
Global Financial
Markets
- The Financial Markets play a major role in the Global Economy because
it helps businesses to raise capital (in capital markets), they facilitate
transferring of risk (in derivative markets), and they help international
trade (in currency markets) to prosper.
- Some of the Important Stock Exchanges of the world are:
- The New York Stock Exchange (merged with Euronext): The New York Stock Exchange
(NYSE) is a stock exchange based in New York City, USA that was incorporated
in 1817. In terms of dollar volume, it is the largest stock exchange
in the world, and in terms of the number of companies listed it is the
second largest stock exchange in the world. The NYSE is also known as
the Big Board. The indexes used in the NYSE are the NYSE Composite Index
and the Dow Jones Industrial Average Index. The NYSE functions under
NYSE Euronext, the formation of which was
the result of NYSE's merger with Archipelago Holdings and Euronext.
Global Financial
Markets
- Tokyo Stock Exchange: The Tokyo Stock Exchange (TSE), incorporated
in 1949, is located in Tokyo, Japan. In terms of monetary volume, The
Tokyo Stock Exchange is the second largest stock exchange in the world,
only next to New York Stock Exchange. The indexes used in the TSE are
Nikkei 225, Topix, and J30.
- NASDAQ: The National Association of Securities Dealers Automated Quotations,
or NASDAQ, is an electronic stock market based in New York City, USA
that was incorporated in 1971. The NASDAQ Stock Market, Inc. is the
owner and regulator of NASDAQ. The main index used in NASDAQ is the
NASDAQ Composite.
- London Stock Exchange: Established in 1801, the London Stock Exchange
(LSE) is one of the oldest and largest stock exchanges in the world.
In terms of market capitalization, the London Stock Exchange was ranked
4th among all the other important stock exchanges in the world in March
2007. The London Stock Exchange is located in Paternoster Square near
St. Paul's Cathedral, London. The stock market index of London Stock
Exchange is the Footsie (FTSE).
Global Financial
Markets
- Euronext (merged with NYSE): Founded in 2000, Euronext N.V. is a pan-European Stock Exchange, which
is based in Paris. In terms of market capitalization, Euronext ranks as the fifth largest
stock exchange in the world. There was a merger of Euronext with the NYSE Group, which
led to the formation of NYSE Euronext and it is the first global
stock exchange. The main indexes used in Euronext are the Euronext 100 Index and the Next 150
Index.
- The Bombay Stock Exchange (BSE): Located in Mumbai, India and founded
in 1875, the Bombay Stock Exchange is the oldest stock exchange of Asia.
The main index of BSE is called the BSE Sensex (Sensitive Index) or the BSE
30. In terms of volume of transactions, the BSE was ranked as one of
the top five stock exchanges in the world in 2005.
Global Financial
Markets
- Today equity research has become a specialized activity, although
confined to a very small segment of the market. It would be a little
early to consider equity research as an independent business segment,
but at the same time it must be appreciated that the value of equity
research is being felt by the market. This is an interesting stage in
the growth and development of equity research, especially in a situation
where the traditional individual investor is unwilling to pay for vital
stock related information while the institutional investor is already
paying for research reports.
- The phenomenal growth of the financial markets over the last quarter
of a century has meant that the very character of investment has changed
with ever larger scales of market capitalization. The emergence of the
Fund Manager as a new value addition in investment related financial
services is actually a part of the growth and development of the institutional
investor. The fund manager's sole objective is to ensure maximum returns
for his clients whose money he invests working in tandem with research
inputs. The fund manager and his client are a vital part of the institutional
investment process sustained by an advanced and research driven approach
to capital market investment.