Accounting technicians scheme west africa
D.3 Financial markets/System
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| D.3 Financial markets/System Financial Markets include any place or system that provides buyers and sellers the means to trade financial instruments, including bonds, equities, the various international currencies, and derivatives. Financial markets (money and capital markets) consist of institutions, agents, brokers and intermediaries (banks, insurance companies, pension funds) transacting purchases and sales of securities. Financial markets facilitate the interaction between those who need capital with those who have capital to invest. The persons and institutions operate in a contractual communications networks which form an external visible financial structure. To state it more simply, let us imagine a bank where an individual maintains a savings account. The bank can use their money and the money of other depositors to loan to other individuals and organizations and charge an interest fee. The depositors themselves also earn and see their money grow through the interest that is paid to it. Therefore, the bank serves as a financial market that benefits both the depositors and the debtors. Financial markets are divided into two investors and financial institutions. These financial institutions are organisations which act as intermediaries, agents and brokers in financial transactions. Financial intermediates purchase securities for their own account and sell their own liabilities and ordinary shares etc, whereas agents and brokers contract on behalf of others. 265 D.4 Nature of Financial system (a) The domestic financial system of any country refers to a set of instructional and other arrangements that transfer savings from those who generate them to those who ultimately use them for investment or consumption. b) It is made up of a mechanism for organising and managing the payments for current and capital transactions c) It is a mechanism for the collection and transfer of savings by banks and other depository institutions d) It is an arrangements covering the activities of capital markets with respect to the issue and trading of marketable and transferable long-term securities e) It is an arrangements covering the workings of money and credit markets dealing with short-term financial instruments f) It covers the activities of financial market complementary to the capital market, credit and money markets, which in essence provide hedging (or risk insurance) facilities, such as the new future markets. Download 3.37 Mb. Share with your friends:
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