Structure of Financial Market

5 Key excerpts on "Structure of Financial Market"

• 

  eBook - PDF

  New Structural Economics

  A Framework for Rethinking Development and Policy

  • Justin Yifu Lin(Author)
  • 2012(Publication Date)
  • World Bank

    (Publisher)

  What explains financial structure? Does the combination of institu- tions and markets that constitute the financial system have any impact on economic development? These questions have fascinated economists for decades. One of the earliest attempts to address these questions was Gold- smith (1969), who 40 years ago tried to document the change in financial structure over time and to assess the impacts of financial development on economic development. He states that “one of the most important prob- lems in the field of finance, if not the single most important one, almost everyone would agree, is the effect that financial structure and development have on economic growth.” With data from 35 countries for the pre-1964 period, he finds positive correlation between financial development and economic growth. But data constraints prevented him from going far on financial structure: he could rely only on careful comparisons of Germany and United Kingdom. Obviously, it is hard to extend the conclusions from case studies to the rest of the world. Since Goldsmith wrote, there has been great progress in the research on financial structure. Having collected comprehensive cross-country data on financial structure themselves (along with their coauthors), Demirgüç- Kunt and Levine (2001) find from this new data set that financial systems become more complex as countries become richer with both banks and markets getting larger, more active, and more efficient. But in general, the structure becomes more market-based in higher-income countries. They also find strong and consistent evidence that what matters for economic development is the level of financial development, and that the relative mix of banks and stock market does not matter much (Beck et al. 2001). Financial Structure and Economic Development | 263 This conclusion that financial structure is irrelevant for development faces significant challenge.

  Sign up to read

  Learn more about book
• 

  eBook - ePub

  Investments

  Principles of Portfolio and Equity Analysis

  • Michael McMillan, Jerald E. Pinto, Wendy L. Pirie, Gerhard Van de Venter(Authors)
  • 2011(Publication Date)
  • Wiley

    (Publisher)

  CHAPTER 1 MARKET ORGANIZATION AND STRUCTURE Larry Harris Los Angeles, CA, U.S.A. LEARNING OUTCOMES After completing this chapter, you will be able to do the following:

  • Explain and illustrate the main functions of the financial system.
  • Describe classifications of assets and markets.
  • Describe the major types of securities, currencies, contracts, commodities, and real assets that trade in organized markets, including their distinguishing characteristics and major subtypes.
  • Describe the types of financial intermediaries and the services that they provide.
  • Compare and contrast the positions an investor can take in an asset.
  • Calculate and interpret the leverage ratio, the rate of return on a margin transaction, and the security price at which the investor would receive a margin call.
  • Compare and contrast execution, validity, and clearing instructions.
  • Compare and contrast market orders with limit orders.
  • Describe the primary and secondary markets and explain how secondary markets support primary markets.
  • Describe how securities, contracts, and currencies are traded in quote-driven markets, order-driven markets, and brokered markets.
  • Describe the characteristics of a well-functioning financial system.
  • Describe the objectives of market regulation.

  1. INTRODUCTION

  Financial analysts gather and process information to make investment decisions, including those related to buying and selling assets. Generally, the decisions involve trading securities, currencies, contracts, commodities, and real assets such as real estate. Consider several examples:

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  The Economics of Financial Markets

  • Roy E. Bailey(Author)
  • 2005(Publication Date)
  • Cambridge University Press

    (Publisher)

  Asset market microstructure 43 As already noted, the exchanges themselves now also compete with one another for business (share listings and trading volume). The nature and extent of this competition is affected by regulation as well as the underlying forces of technology. 2.3.2 Regulation of financial markets Practically all financial markets are regulated in some way or another. The regulation is typically highly complex – too complex to warrant discussion here. Very often exchanges themselves form part of the regulatory mechanism, together with the involvement of external organizations. Thus, for example, the Securities and Exchange Commission (SEC) oversees financial markets in the United States, while the Financial Services Authority (FSA) has broadly similar responsibilities in the United Kingdom. The declared purpose of regulation is normally to protect investors from prac-tices and conduct deemed to be unfair or improper. Most directly, the protec-tion is intended to guard against fraud. More indirectly, regulation ostensibly seeks to foster competition, with resulting benefits for the consumers of financial services. Investors themselves would possibly favour protection against all losses sustained on their investments, including losses incurred when asset prices fall. Such comprehensive protection stretches beyond the bounds of regulation that has been, or is likely to be, adopted. However, when losses occur as a consequence of what is perceived to be bad advice, investors may feel justified in seeking compensation – either from those who gave the advice or from the regulators responsible for overseeing the advisers. In these circumstances, resorting to liti-gation will test how far the law requires investors to bear the consequences of their own decisions. Much of the regulation in financial markets is self-regulation.

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  Introduction to Finance

  Markets, Investments, and Financial Management

  • Ronald W. Melicher, Edgar A. Norton(Authors)
  • 2020(Publication Date)
  • Wiley

    (Publisher)

  Our approach in this book is to provide survey exposure to all three areas of finance. • Institutions and Markets Financial institutions and financial markets are necessary components of an efficient financial system. Institutions perform an important financial intermediation role by gathering the savings of individuals and then lending the pooled savings to businesses that want to make investments. • Investments Securities markets are also impor- tant components of an efficient financial system. The primary securities market facilitates raising funds by issuing new debt and equity securities. The secondary market for securities facilitates the transfer of owner- ship of existing securities among investors. • Financial Management Business firms continu- ally interact with financial institutions as they carry out their day-to-day operations. Businesses also often seek to raise additional funds to finance investment in inven- tories, equipment, and buildings needed to support growth in sales. Bank loans and mortgage loans are important financing sources, along with the proceeds from the issuance of new debt and equity securities. LO 1.1 Finance is the study of how businesses and others acquire, spend, and manage money and other financial resources. More specifically, finance is composed of three areas – financial institutions and markets, investments, and financial management. However, these three areas are not independent of one another but rather intersect or overlap. This book’s survey approach to the study of finance covers all three areas. LO 1.2 You should study finance so that you can make informed economic, personal and business investment, and career decisions.

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  The Evolution of US Finance: v. 2: Restructuring Institutions and Markets

  • Jane W. D'Arista(Author)
  • 2015(Publication Date)
  • Routledge

    (Publisher)

  Given the proliferation of ehoices, it is difficult to determine whether or not less sophisticated users of financial services-again, whether individuals, businesses, or other financial institutions-are suffi-ciently equipped to select appropriate services. Moreover, they are the least likely to pay for information that is not tied to transaetions costs. The benefits to the average borrower and investor from structural changes that foeus on gains in eompetition, efficieney, and eonvenienee may be marginal if other traditional goals of financial regulation are ig-nored. Notes 1. Testimony of Professor Benjamin M. Friedman, U.S. House of Representa-tives, p. 243. 2. Some of the economic effects of the intemationalization of financial mar-kets are also discussed in Part H, chapter 4, and in appendixes A and B. 3. See Table 8.1, appendix 8. 4. See Part H, chapters 4 and 7. 5. One hypothesis, foreign official investment of dollar reserves in V.S. Trea-sury securities, is discussed in appendix A. 6. See Tables A.1 and A.2, appendix A. 7. See Part H, chapter 7. 8. See Table A.2, appendix A. 9. These developrnents are also discussed in Part H, chapter 7. 10. See Part H, chapter 7. 11. V.S. General Accounting Office, Survey of Investor Protection and the Regula-tion of Financial Intermediaries, p. 24. NASD's membership includes virtually all 110 FINANCIAL STRUCTURE AND REGULATION exchange members that deal with the public and totaled 3,196 main and 8,320 branch offices of member firms as of October 31, 1981 (p. 23). 12. The V.S. government securities market is an example of an unstructured market domina ted by a small group of market participants. Although it is one of the largest and most important markets in the world, the majority of underwrit-ing and trading activity is conducted by a limited number of primary dealers that are regulated and supervised by the Federal Reserve Bank of New York on a voluntary basis.

  Sign up to read

  Learn more about book