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1. FINANCIAL
MARKETING
GROUP;
AQSA, IQRA , MARIA

2. DEFINITION
• The financial market
is a broad term
describing any
marketplace where
trading of securities
including equities,
bonds, currencies and
derivatives occur.

3. WHAT IS FINANCIAL MARKET?
• A financial market is a place for buying and selling of financial
securities such as stocks and bonds. It facilitates:
• The raising of capital (in the capital markets)
• The transfer of risk (in the derivatives markets)
• In matching those who want capital to those who have it.

4. FINANCIAL MARKET OF PAKISTAN
Financial Market in Pakistan consists of
(i) Money Market which provides short term funds and
(ii) Capital Market which makes long terms funds available to
businesses and industries.
The Financial market can be reclassified into
(i) Primary Market in which new shares or bonds are issued
(ii) Secondary Market in which securities previously issued are traded such as Shares,
Bonds, Commercial Papers, Options and Mutual Fund.

5. ABOUT FINANCIAL MARKET;
 Some financial markets are small with little activity, while some financial markets
like the New York Stock Exchange (NYSE) trade trillions of dollars of securities daily.
 Financial markets may be viewed as channels through which flow loanable funds
directed from a supplier who has an excess of assets toward a demander who
experiences a deficit of funds.
 Markets work by placing the two counterparts, buyers and sellers, at one place so
they can find each other easily, thus facilitating the deal between them.

6. Types of Financial
Marketing
• Capital Market
• Foreign exchange market
• Commodity market
• Derivatives market
• Exchange-traded derivatives
• Over-the-counter derivatives
• Insurance market
• Money Market
• Future Market
• Bond Market
• Stock Market

7. Capital Market
The capital market aids raising of capital on a long-term basis,
generally over 1 year. It consists of a primary and a secondary market
and can be divided into two main subgroups – Bond market and Stock
market.
 The Bond market provides financing by accumulating debt through
bond issuance and bond trading
 The Stock market provides financing by sharing the ownership of a
company through stocks issuing and trading

8. MONEY MARKET
• It facilitates the interaction between individuals and
institutions with temporary surpluses of funds and
their counterparts who are experiencing a temporary
shortage of funds.
• One can borrow money within a quite short period of
time via a standard instrument, the so-called “call
money”. These are funds borrowed for one day, from
12:00 PM today until 12:00 PM on the next day, after
which the loan becomes “on call” and is callable at
any time.

9. Foreign Exchange market
 The foreign exchange market abets the
foreign exchange trading.
 It’s the largest, most liquid market in the
world with an average traded value of more
than $5 trillion per day.
 It includes all of the currencies in the world
and any individual, company or country can
participate in it.

10. The commodity market manages the trading in primary
products which takes place in about 50 major
commodity markets where entirely financial transactions
increasingly outstrip physical purchases which are to be
delivered. Commodities are commonly classified in two
subgroups.
 Hard commodities are raw materials typically mined, such as
gold, oil, rubber, iron ore etc.
 Soft commodities are typically grown agricultural primary
products such as wheat, cotton, coffee, sugar etc.
Commodity Market

11. Derivatives Market
 It facilitates the trading in financial instruments such as
futures contracts and options used to help control
financial risk.
 The instruments derive their value mostly from the
value of an underlying asset that can come in many
forms
– stocks, bonds, commodities, currencies or mortgages.
 The derivatives market is split into two parts which are
of completely different legal nature and means to be
traded.

12.  These are standardized contracts traded on an
organized futures exchange.
include futures, call options and put options.
 Trading in such uniformed instruments
requires from investors a payment of an initial
deposit which is settled through a clearing
house and aims at removing the risk for any of
the two counterparts not to cover their
obligations.
Exchange-traded derivatives

13. Over-the-counter derivatives
 Those contracts that are privately negotiated and
traded directly between the two counterparts, without
using the services of an intermediary like an exchange.
 Securities such as forwards, swaps, forward rate
agreements, credit derivatives, exotic options and
other exotic derivatives are almost always traded this
way.
 These are tailor-made contracts that remain largely
unregulated and provide the buyer and the seller with
more flexibility in meeting their needs.

14.  It helps in relocating various risks.
 Insurance is used to transfer the risk of a loss from
one entity to another in exchange for a payment.
 The insurance market is a place where two peers, an
insurer and the insured, or the so-called
policyholder, meet in order to strike a deal primarily
used by the client to hedge against the risk of an
uncertain loss.
Insurance Market

15. FUTURE
EXCHANGE
•A futures
exchange or futures market is a
central financial exchange where
people can trade
standardized futures contracts;
•that is, a contract to buy specific
quantities of a commodity or
financial instrument at a specified
price with delivery set at a specified
time in the future.

16. The spot market or cash market is a public
financial market in which financial
instruments or commodities are traded for
immediate delivery. It contrasts with a
futures market, in which delivery is due at
a later date.
Spot Market

17. 4 IMPORTANT FUNCTIONS
OF FINANCIAL MARKET
•(1) Mobilization of Savings and their
Channelization into more Productive Uses
•(2) Facilitates Price Discovery
•(3) Provides Liquidity to Financial Assets
•(4) Reduces the Cost of Transactions

18. (1) MOBILIZATION OF SAVINGS AND THEIR
CHANNELIZATION INTO MORE PRODUCTIVE USES
 Financial market gives impetus to the savings of
the people. This market takes the uselessly lying
finance in the form of cash to places where it is
really needed.
 Many financial instruments are made available for
transferring finance from one side to the other
side.
 The investors can invest in any of these
instruments according to their wish.

19. (2) FACILITATES PRICE DISCOVERY:
•The price of any goods or services is
determined by the forces of demand and
supply.
•Like goods and services, the investors also
try to discover the price of their securities.
• The financial market is helpful to the
investors in giving them proper price.

20. (3) Provides Liquidity to Financial Assets:
 This is a market where the buyers and
the sellers of all the securities are
available all the times.
 This is the reason that it provides
liquidity to securities.
 It means that the investors can invest
their money, whenever they desire, in
securities through the medium of
financial market.
 They can also convert their
investment into money whenever
they so desire.

21. (4) REDUCES THE COST OF
TRANSACTIONS
• Various types of information are needed
while buying and selling securities.
• Much time and money is spent in
obtaining the same.
• The financial market makes available
every type of information without
spending any money.
• In this way, the financial market reduces
the cost of transactions.

22.  They can provide an opportunity for you to invest money in
shares (also known as equities) to build up money for the future.
 Provide a better return than opening a savings account at your
bank. However buying shares can be risky. It is important to
remember that the value of any investment can go down as well
as up, and getting good returns in the past does not always mean
they’ll be good in the future.
How do financial markets
help Us?

23.  financial markets also allow people to take
out insurance. Insurance companies need to use financial
markets to make sure you will receive a pay-out if you have an
accident, such as losing or damaging your mobile phone.
 Financial markets enable banks to borrow money, helping
them to make loans to people wishing to borrow – whether
that’s attending university with a student loan, say, or buying
a house with a mortgage.

24. HOW DO FINANCIAL MARKETS HELP
BUSINESSES?
•Financial markets provide finance for companies
so they can hire, invest and grow.
•For example, Apple started in a garage in
California. While it had some great ideas, it
needed money to make them happen.
•In 1977, it persuaded a single investor to loan
the company $250,000. Over time, the company
grew and less than five years later it was able to
borrow over $100 million from financial markets
by selling shares in the company.
•Apple is now worth hundreds of billions of
dollars and employs over 100,000 people.
•So, when they work well, financial markets can
make the country much better off.