Context of the financial market and its role in the economy
Myratgeldiyev Berdi Merdanovich, teacher;
Bayiyev Ibrayym Hasan ogly, teacher
Turkmen State Institute of Finance (Ashgabat)
It should be known to everyone that in order to effectively develop the economy, it is necessary to pool temporary free resources of private and institutional parties and to distribute and redistribute them among different parts of the economy on a commercial basis. This should be done in the financial markets.
Financial markets are markets where supply and demand for various financial instruments are determined. Financial markets operate as a set of interdependent and co-operating markets. Some of them include:
– credit market — through this market, cooperation is established between businesses and citizens in need of financial resources, organizations and citizens who can provide necessary funds under certain conditions;
– securities market — a market that combines a part of the credit market, instruments such as loans or debt obligations, and the market of property (ownership) instruments, that is, this market is for issuing debt and property instruments, as well as their mixed forms, ensuring their circulation. including transactions etc.
A financial market is a separate mechanism that operates to conduct transactions with securities and financial contracts.
The term «financial market» is quite variable, confusing and has conflicting interpretations. However, narrow and broad interpretations of the financial market differ.
Both are used by experts to describe certain phenomena for one or another purpose.
Two main approaches to the financial market According to the first approach, the financial market is defined as the institutions that carry out trade in financial instruments. To such institutions
Examples include stock exchanges that primarily trade in stocks and bonds. Along with them, futures and derivatives exchanges operate in the financial market. Financial instruments can be traded by banks (especially investment banks), brokerage firms, insurance companies, and investment funds. They conduct their business on stock exchanges and over-the-counter markets.
According to the second approach, the (extended) financial market is a market that includes trade transactions and trade relations, and is intended to bring together buyers and sellers to trade in financial products.
Various relationships arise during the buying and selling of securities. They belong to the concept of «market» in the broadest sense of the word.
For educational purposes, financial-credit system specialists understand the term financial market, the set of relevant mechanisms and instruments provided in the financial market.
In the popular and public literature, the financial market often refers to the raising of capital in the form of speculation. Markets can also be viewed from another perspective: nationality, organizational level, and characteristics of the resulting instruments. Financial markets can be divided into national and international, organized (primarily over-the-counter), unorganized (over-the-counter), specialized (treasury, futures, etc.) and comprehensive.
In international practice, the following grouping (classification) of financial markets is accepted.
Capital markets, in turn, are divided into stock markets and bond markets:
– Commodity markets are organized (exchange-traded) markets in which contracts for the supply of goods are considered the subject of trade. Those contracts are usually resold, which makes them classified as financial instruments and connects the commodity market to the financial market. However, the transfer of goods (money-paper) does not belong to the financial market;
– money markets — through this market, legal and economic interactions between money sellers and buyers are established. They offer short-term (up to 1 year) credit instruments: debt obligations, promissory notes, short-term bonds. Trading in these markets is largely conducted by banks;
– derivatives markets. Here, the subject of trading is securities created from common commodities, securities and contracts, as well as price movements (for example, trading through index contracts);
– futures markets ensure the circulation of standard contracts for the trading of products in the specified period of the future;
– insurance markets redistribute various risks and establish trade through standardized insurance obligations;
– foreign exchange markets set up trade in order to ensure the physical delivery of currencies, as well as to insure against changes in their exchange rates during the period of currency contracts.
Today's treasury markets are multifaceted. As a result, it is very rare to find exchanges that only trade stocks and bonds. In addition to trading stocks and bonds, many stock exchanges also trade other financial instruments. After all, stock exchanges remain the determinants of capital redistribution and price fixing. They also attract other financial instruments and introduce them into their circulation.
Securities market regulation and supervision of financial institutions cannot act as a guarantee against bankruptcy. In a market economy, default is the other side of the risk a financial institution bears. The manner in which insolvency proceedings are implemented, and the associated losses, raise debate about the extent to which the financial system is supported at the expense of investors and consumers of financial services. Therefore, such issues should not be the sole concern of state regulatory and supervisory agencies.
Securities are the main commodity of this market and it is a unique product that is bought and sold in this market. As a financial market instrument, securities are certificates of debt or ownership.
Securities are a stable component of a unique «stock» — money. They should have the following characteristics:
– standard — issuer's record, amount of money, income, information about the issuer;
– marketability — proof (certificate) that the security can be traded on the market;
– liquidity — evidence that the security can be sold at any time without incurring significant losses;
– regulation by the state — existence of standards, emission registration.
In international practice, market participants are conditionally divided into two levels. Decision-makers in the financial market make up the first level. They consist of issuers, investors and investment institutions (financial intermediaries and independent intermediaries (brokers, dealers)).
The second level (market services) — they perform the tasks related to the implementation of decisions adopted at the first level, registration, settlements, ensuring registration of the rights of holders of securities, accounting and payment of income and carrying out agency operations.
Financial market facilities include exchanges, registrars, depositories, custodians, trading and settlement systems.
References:
- Стровский Л. Е., Казанцев С. К., Паршина Е. А. и др. Внешнеэкономическая деятельность предприятия: Учебник для вузов-Москва: ЮНИТИ-ДАНА, 2004г
- «Стратегический электронный внутридневной трейдер» — The Strategic Electronic Day Trader, Robert Deel. Wiley, New York, 2000.
- www.wallstreetdirectory.
- www.prophet.net технический анализ.
