3. INTRODUCTION
Financial institutions are business organizations that act as mobilisers and
depositories of savings, and as purveyors of credit or finance. They also provide
various financial services to the community. They differ from non financial business
organizations in respect of their wares, i.e., while the former deal in financial
aspects such as deposits, loans, securities, and so on, the latter deal in real assets
such as machinery, equipment , stocks of goods ,real estate , and so on .
4. MEANING OF FINANCIAL MARKET
Financial markets are the center's or arrangements that provide facilities for
buying and selling of financial claims and services. The corporations, financial
institutions, individual's , and governments trade in financial products on these
markets either directly or through brokers and dealers on organized exchanges
or off- exchanges. The participants on the demands and supply sides of these
markets are financial institutions, agents, brokers ,dealers, borrowers, lenders ,
savers, and others who are inter-linked by the laws, contracts ,covenants , and
communication networks.
5. DEFINITION OF FINANCIAL MARKET
According to Brigham Eugine F has defined a financial market thus, “ The place,
where people and organizations, wanting to borrow money, and brought
together with those having surplus funds ,is called a financial market.”
6.
7. 1.On The Basis Of Maturity Of Security.
• Money market:- Money market is a market where short term funds having a
maturity period of less than one year are offered in the market. It is highly
organized money market and dominated by banks. The money market players
are RBI , Insurance companies, mutual fund companies.
• Capital market:- The capital market is a market where the long term securities
are traded which is usually a maturity period of more than one year,. The
capital market instruments are Equities, Preference shares, Debt instruments
and derivatives.
8. 2. On The Basis Of Seasoning Of Claim.
• Primary market:- It deals with the securities which are issued for the first time.
It is a market where companies issues new shares to the initial /new buyers.
The different ways to rise the primary market are public issue, right issue,
private placement.
• Secondary market:- It is a market for secondary sale of securities takes place.
Securities which are previously traded in primary market are traded in
secondary market.
9. 3.On The Basis Of Timing And Delivery.
• Cash or spot market:- It is a market where financial instruments are
traded for immediate of delivery. It is also known as physical market,
where the delivery of financial instruments or commodities takes place on
the day of trade. [ Trade+ 2 days]
• Forward or future market:- It is a financial market, where the delivery
happens on a future date. It is a market where the buyer and seller is in a
contract . The seller sells the shares on present day, with the condition that
the shares will be delivered on a specified future date at a predetermined
price.
10. 4.On The Basis Of Organizational Structure
• Exchange market:- It is a market where, buyers and sellers of securities of
their agents or brokers carry trade of securities.
• Over the counter market:- It is a market which is decentralized with
customized procedures. It is a market where the dealers at a different
places who have inventory of shares stand ready to buy and sell securities
“over the counter” to any one who is ready to accept their prices.
11. Classification of financial instruments
• Financial assets :- Financial asset is a non-physical asset whose value is
derived from a contractual claim, such as bank deposits, bonds, and
participations in companies’ share capital. Financial assets are usually more
liquid than other tangible assets, such as commodities or real estate.
They are:-
SDR’s
Monitory gold
Currency , loans
Deposits, Securities other than share
Borrowings, Shares and other equity
12. • Other Financial instruments are:-
Letter of credit.
Letter of gurantee.
Financial commitments.
Pledged financial assets.
13. CONCLUSION
Over the period, financial markets have evolved a lot and gained importance in
the functioning of an economy. It meets the companies funding requirements
and offers good investment oppurtunites for those with excess funds.
Financial market aid high liquidity, investor protection, and market pricing
discovery. Given its importance, this article intended to provide you some
insights into financial markets and their various classifications based on
different dimensions.
