Financial markets. Participants in financial markets. Functions of financial markets
If we talk about the market within the country or in the international format, then in a large number of cases it is the barter of products or material for cash. It is difficult for ordinary people to imagine that from two sides of such an exchange there can be a currency in a different form, which itself can act as a product. Initially, all this looks rather incomprehensible, but directly this is the basis of the global turnover and the market within the states.
What is hidden under the concept of the financial market?
The financial market is a normalized concept of trading both in currency and its analogue, due to which a continuous movement of funds among investors, countries, companies and other partners is accomplished.
Based on a wide range of different interests, the market can be divided into various elements and types of relationships.
The most important function in our century is speed.It has long been established that demand creates supply, and financial markets (participants in financial markets) promptly help foreign exchange funds to those who need them and to those who agree to give more than their value, because of need, or believing in repeated earnings increases in the future.
The “state of health” of the country's economy is determined by the liveliness of currency capitals. It is possible to compare this with the blood flow of a person, that is, in a healthy state, the blood rapidly brings nutrients to each human organ, as well as in the economy - the resources sold are rapidly moving from owner to owner, meeting the requirements of market members.
In today's society, almost no state is able to act in isolation. Now the state money does not make a turnover inside the country, it has gone beyond its limits, respectively, participants in the financial market are international partners.
The international financial market is a formed concept of interaction between state and international economic markets in which the movement of funds is performed on a global scale.
Currency funds are distributed based on competition between countries and their economic sectors.
How does this happen?
Consider the examples of cash flow - this will help to make a picture of how financial markets work (financial market participants interact with each other).
Sample 1. Suppose a businessman has started to increase the production of furniture, but at present he does not have enough money to buy the necessary special equipment.
If his business contains the configuration of a public joint-stock company, he may produce additional shares.
Investors, hoping for the prosperity of his company, acquire shares for the investment of their money and with the hope of making profit while increasing the price of shares. Special equipment is bought, trade increases, as well as income, stocks increase in value, investors sell them for an amount that is higher than the original, thereby extracting income for themselves.
Sample 2. To open business, people go to the bank and get the necessary funds on credit. The bank itself lends cash to the Central Bank at interest, but they are small compared to those directly provided to the borrower.
Thus, the bank earns on the difference received from interest payments. In this case, the participants of the financial market are the Central Bank, the borrower bank and the entrepreneur.
The concept of the financial market
From the examples above, the following follows. The modern world is built on a system of relations based on the principle of the exchange of economic benefits, called the financial market. The financial market, in turn, cannot exist without financial instruments. They represent the money supply in the form of cash, cashless savings held in bank accounts, as well as securities, futures, currencies, options.
Types of financial markets
The financial market may have the following structure (depending on the type of operations performed):
- credit market;
- currency market;
- stock market;
- investment market;
- insurance market;
- the gold market.
The term "credit market" means the economic space with the movement of free cash. People who have an excess of free funds, provide them to the use of those in need on favorable terms. The main purpose of such transactions is to earn interest on the loan. Examples of these types of transactions a huge amount.One of the most popular are bank lending transactions. The bank provides the citizen with the required loan amount immediately, and the latter, in turn, returns it with interest determined by the bank for the designated period.
The foreign exchange market, or Forex, is a global market linking participants in payment relations in all countries of the world. The principle of this segment is based on determining the relationship of supply and demand for specific currencies. The sale or purchase of funds depends on the exchange rate set by the bank. It must be remembered that such operations without the participation of the bank is illegal.
The securities market, or stock market, is a market segment where securities are issued, are in circulation and sold. Under the securities mean a bill, check, stock, option, futures and other types. In this area, the principle of transferring money to securities.
The principle of the investment market is profitable investment or investment projects. Cash, securities or other property that has a monetary value, is invested in the objects of any activity for the purpose of making a profit or achieving a beneficial effect.In other words, capital is redistributed at the expense of financial companies or private individuals as a result of their investment in development (investment), for example, only of the opening company, which does not have enough own funds, by buying shares issued by it.
The insurance market is a part of the financial market in which insurance services are offered. The subject of insurance can be both own life, health, working ability, and business risks.
In the gold market, there are both retail and wholesale transactions with gold bars, which are also used for international payments. Who occupies the financial markets?
Financial market participants
There are two large categories in the financial market: sellers and buyers, as well as intermediaries. Participants in the financial market are all sorts of banks, monetary and credit financial organizations, investment and insurance companies, currency and stock exchanges.
The first category (sellers and buyers) include entities acting in their own interests and using their funds.
In the second category, we are talking about intermediaries, that is, people or companies that are the link between the buyer and the seller.These professional participants of the financial market, in their essence, act as consultants in this matter (concerning the transaction) or as official representatives of the parties.
In each area, its participants in the relationship: lenders and borrowers, insurers and insurers, issuers (those involved in the issuance of securities) and investors (those who acquire or invest). The financial market of Russia, whose members, in principle, do not differ from representatives of other countries, has its own peculiarities.
Thus, we can conclude that the concept of a financial market is closely related to financial instruments, the existence of which cannot be dispensed with. They entered the modern life of people and companies, being an integral part of world economic relations.
Traders as part of the financial market
The cabinet of financial market participants is impossible to imagine without traders. Who are they? A trader is a person who closely monitors changes in charts and graphs while sitting in front of several screens. Modern "merchants" no longer have to sit in the pits on the stock exchange, now, thanks to the Internet, all the information necessary to complete transactions falls under their control.
The trader carefully monitors changes in exchange rates, stocks or other securities, examines the news. His work requires discipline and patience in order to take a favorable quote. All his work is that it is necessary to carefully analyze and make a good deal.
What is the job of a trader?
As a rule, its activities cover stock and currency financial markets. Participants in the financial markets of this type are of two types: professionals and amateurs. The professionals have a permanent job in banks, brokerage firms or analytical centers, for this they need to have a special education. They must have a license for this work, it is currently issued only by the Central Bank of Russia.
The work is too responsible, because the deliberate or inadvertent disruption of the trader threatens the company with huge losses. In the history there were not many such cases. For example, in 2011, UBS Bank, located in Switzerland, lost more than two billion dollars, thanks to the unauthorized actions of its working trader Kvek Adoboli.
There are several options for traders: investors, arbitrageurs, hedgers and speculators. All their activities and specificity are determined by the goals that they set when concluding transactions.
A whole army of amateur traders already exists, their desire is to get rich on sales of financial instruments. There is no need to have any kind of education, to begin with, a few thousand rubles will suffice and the desire to master a new area of earnings. As a rule, novice traders resort to advice to professional colleagues or use the services of intermediaries - brokers.
Who are brokers?
Broker - a legal entity that represents the interest of his client for a certain commission. That is, these are financial intermediaries. They also need a license to sell securities, issued by the Central Bank of the Russian Federation. Participants in the financial market of this type are widely known today.
Today on the Internet a huge number of offers from brokerage companies, which are addressed to ordinary Internet users, eager to increase their savings. Usually,On the brokers website you can create a personal account, open an account, study video tutorials on the rules of sale, and also get practical training with demo accounts in the demo of the installed program on the website.
A novice trader can install a browser-based version of the trading platform recommended by a broker into his or her own computer and select the most favorable tariff. The interest of the broker in the successful trading of his client will always be in the first place, because the proceeds from the auction sets the size of the commission. Brokers always offer the client to master free training, because the success and literacy of the trader depend on it.
Dealing companies and dealers
Dealers, unlike brokers, are more independent intermediaries between the buyer and the seller. The broker can not become the owner of the assets, and can not bring them to the exchange and sell only at the expense of the client. In turn, the dealer has the right to place assets on his balance sheet, hold back and conduct the entire business at his own expense. Only a legal entity can be a dealer - as required by Russian laws.Very often this role is played by funds, insurance organizations and banks - participants in the financial market.