More Information About the Financial Market And The Institutions

The financial market is the place where the financial securities or the assets get bought and sold. It helps in facilitating the investing and financing of the firm, individuals and also government agencies. Participants which offer the funds are called as a surplus unit. For example- Individuals.  And the participants that enter the financial market in order to obtain funds are called as deficit units. For example- Government.

There are different kinds of financial market. This market can be categorized on the basis of the maturity structure and the trading structure of the securities.

On the basis of maturity:

  • Money market- This market facilitates short-term fund flow.
  • Capital market- This market facilitated long-term fund flow.

On the basis of trading structure:

Primary Vs secondary market- The primary market facilitates the issue of new assets or securities and the secondary market facilitates the trading of existing stocks or securities.

Organized Vs unorganized markets- Most of the market is controlled by a regulatory authority like a stock exchange. And few of the market come under the unorganized market like cryptocurrency market. This is an upcoming market which is gaining its popularity in recent times. Anyone can enter the market and the trade in digital currencies using bitcoin loophole software to earn money.

Role of various financial institutions in the financial market

Commercial banks

  • They are the dominant depository institution
  • It offers a wide range of deposit accounts
  • It serves both private and public sector
  • It provides direct loan and also facilitates the purchase of debt securities

Depository institutions

  • From surplus units, these institutions accept deposits and also offer credit to the deficit units
  • They offer customized loans
  • They are ready to accept the risk on loans
  • They diversify the loans
  • They possess the expertise required to evaluate the creditworthiness

Credit unions

  • These are the non-profit organizations
  • They restrict and offer their service only to the credit union members
  • They are much smaller when compared to other depository institutions

Savings institutions

  • They include the savings banks and the savings & loan associations
  • It is owned by the depositors
  • It mainly concentrates on offering residential mortgage loans

Mutual funds

  • It sells shares to the surplus units
  • It uses up the funds to buy a portfolio of securities. It mainly focuses on the securities from the capital market and also from the money market

 

 

 

 

More Information About the Financial Market And The Institutions