Dec 4, 2012

Article | FINANCIAL MARKET

Financial market is a mechanism for the exchange of financial asset. A financial asset can be money or financial security. E.g. bond and shares. A financial market consist of individual , institutions and instrument which make it possible for the deficit spending unit of an economy to use the surplus funds or surplus spending unit.
A deficit spender is an individual, business or government whose expected expenditure exceed income. The surplus spender on the other hand has income in excess expenditure.

Money market: This a branch of financial market which deals with short term funds or loans. central bank or reserve bank of a nation regulate money market. In money market, financial securities are being traded. E.g. bonds ( issued by local government to raise fund), stocks( often issued by federal government to raise fund), shares( issued by companies to raise), debenture, forex…etc

Capital Market: This is the long arm of financial market. Operators are Security and exchange commission, Stock exchange commission, Issuing houses, Stock brokers, Registrar and so on. Issuing houses help to issue forms by buying shares for from companies and selling prospectus to general public.
Financial elements in capital market include; Treasure bills, treasury certificate, certificate of deposit, banker unit fund…


FUNCTION OF FINANCIAL MARKETS
Efficient intermediation between the surplus and economic unit.
Encourages savings.
Funds are efficiency allocated.
Help reduce transaction cost.

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