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CLASSIFICATION OF FINANCIAL MARKETS

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Zarah Apilado

on 12 January 2015

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Transcript of CLASSIFICATION OF FINANCIAL MARKETS

CLASSIFICATION OF FINANCIAL MARKETS
design by Dóri Sirály for Prezi
Financial Market
Secondary Market “Previously issued securities”
Money Market
“Maturities of 3 years or less (usually 1 year or less)”
Organized Market

A market is a venue where goods and services are exchanged.

A financial market is a broad term describing any marketplace where buyers and sellers participate in the trade of assets such as equities, bonds, currencies and derivatives.

Primary Market “New issues”

A capital market is a market for financial assets which have a
long or indefinite maturity.
Generally it deals with long term securities which have a maturity period of above one year. To do this, a company raises money through the sale of securities - stocks and bonds in the company's name. These are bought and sold in the capital markets.

The capital market is subdivided into three parts:
1.
The bond market
2.
The stock market
3.
The mortgage market

Capital Market
Negotiation Market

A financial market where the common and preferred stocks issued by corporation are traded.
It has two components:
(1) The organized exchanges .
(2) The less formal over-the-counter markets.

The companies whose stocks are traded in the Philippines Stock Exchange are classified into the followings:

1. Banks
2. Financial services
3. Communication
4. Power and Energy
5. Transportation Services
6. Construction and other related product
7. Food, beverages , and tobacco
8. Holding firms
9. Manufacturing, distribution and trading
10. Hotel, recreation, and other services
11. Bonds, preferred stocks and warrants
12. Other




The market for
debt instrumen
t of any kind.

Operates through a system of dealers using a
telecommunications
network, rather than in a single physical location trading.

Dealers include giant banking firm located around the world.

Bond Market
Portion of financial market which deals with loan on residential, commercial, and industrial real estate , and on farmland
.

Mortgage Market
A financial market where the common and preferred stocks issued by corporation are traded.
It has two components:

(1) The organized exchanges .
(2) The less formal over-the-counter markets
Stock markets
.
The companies whose stocks are traded in the Philippines Stock Exchange are classified into the followings:

1. Banks
2. Financial services
3. Communication
4. Power and Energy
5. Transportation Services
6. Construction and other related product
7. Food, beverages , and tobacco
8. Holding firms
9. Manufacturing, distribution and trading
10. Hotel, recreation, and other services
11. Bonds, preferred stocks and warrants
12. Other

Stock markets allow investors to
buy and sell shares in publicly traded companies.
Consumer Credit
Market

Market involved in loans on autos, appliances , education, travel is referred to as the consumer credit market.

Auction Market “Stock exchanges”

Auction market is one where trading is conducted by an
independent third party
according to a matching of prices on orders received to buy and sell particular security. Stocks are sold to the highest bidder out the trading floors.

At the Philippine stock exchange, buyers of securities make their bids and prospective seller make their offer. Bids and offers stipulate both price and volume and are handled by the trader, an agent of the auction market.

Offers are ranked from the lowest price up; bids from the highest price down. Bids and offers are matched with one another. If there is a match, trade is consummated. Buyers and sellers do not directly trade with one another, but through the trader.

When buyers and sellers of securities negotiate with each other regarding price and volume, either directly or through a broker or dealer, they are engage in the financial marketing called negotiation market.

Securities that are not frequently traded and witch are in large volumes may not be readily accommodated in the auction market for lack of time to receive sufficient orders. This situation is remedied by the negotiation market where the buyers and sellers are given sufficient time to locate one another and to revise either price or volume in order to clear the market.

Once in a while, the Philippine government negotiates with institutions like the WORLD BANK for loans intended for various project.

Stock exchange have specifically designed members, and have an elected governing body-the board. Members have seats in the exchange, which are bought and sold. The seat gives the holder the right to trade on the exchange. The board of governors of the Philippines stock exchange is composed of 15 members.

Foreign Exchange Market
The financial success of any business firm will depend much on the
quality of decisions
made by management regarding the firm’s financial activities.

The quality of decision, however, will depend on how well management
understand
s the environment under which business finance operates. An important requirement is the clear understanding of financial markets and how they operate.


A primary market issues new securities on an exchange. Companies, governments and other groups obtain financing through debt or equity based securities.

Primary markets, also known as
"new issue markets"
are facilitated by underwriting groups, which consist of investment banks that will set a beginning price range for a given security and then oversee its sale directly to investors.

A financial market through which existing financial securities are traded.

The secondary market is where investors
purchase securities or assets from other investors,
rather than from issuing companies themselves.

The Securities and Exchange Commission (SEC) registers securities prior to their primary issuance, then they start trading in the secondary market on the New York Stock Exchange, Nasdaq or other venue where the securities have been accepted for listing and trading


Money market is a market for dealing with financial assets and securities which have a maturity period of
up to one year
. In other words, it’s a market for purely short term funds.

The money market is used by participants as a means for
borrowing and lending
in the short term, from several days to just under a year. Money market securities consist of negotiable certificates of deposit (CDs), banker's acceptances, U.S. Treasury bills, commercial paper, municipal notes, eurodollars, federal funds and repurchase agreements (repos)

Money market investments are also called ” cash investments “ because of their short maturities.

Land Bank of the Philipinnes perform Money Market function.

They are one of the most vital areas of a market economy as they provide companies with access to capital and investors with a slice of ownership in the company and the potential of gains based on the company's future performance.
Summary
When management has sufficient understanding of financial markets, it will be able to tap resources, which match the firm’s need’s and capabilities.

Financial markets are useful in two aspects:

(1)

Funds are directed to DSUs (Deficit Spending Unit) which can use them most efficiently; and

(2)

Liquidity is provided to savers.


The foreign exchange market is the market where people buy and sell foreign currencies. This market is composed of the following:

Bank located throughout the world buying and selling foreign monies, in the form of foreign currencies and deposits in foreign banks;
Foreign exchange dealers; and
Currency exchange catering mostly to tourists and are found in the downtown areas, airport, and railroad stations in major tourist centers.

Option Market

One purpose of the options market is to make possible for investor who wish to reduce the risk of losing money due to price changes in the futures. For instance, an importer purchasing goods to be paid in foreign currency may avoid the risk of a sharp rise in the foreign exchange rate by buying an options contract.
The option market is one where stock options are traded. A stock option is a contract giving the owner the right to either buy or sell a fixed number of shares of a stock (usually 100) at any time before the expiration date at a price specified in the option.

The organized market is that financial market with fixed trading rules. It is situated at a central location in the financial district in which trading is generally conducted by auction. Another name for organized markets are exchange like the Philippines stock exchange and Australian stock exchange. Common and preferred stocks, bonds, and warrants are sold at the Philippines stock exchange.


But those who desire to be rich fall into temptation, into a snare, into many senseless and harmful desires that plunge people into ruin and destruction.
1 Timothy 6:9
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