Financial Markets

Market is a widely popularized word which does not only define a physical place of exchange. But in the
wider perspective of economics, there are many forms of market that rule the activities of people as well
as businesses. It is any place where the trading of financial securities / financial instruments such as
security bonds, derivatives, stocks, currency and many more takes place. It is not confines to a fixed
marketplace where the buyers and sellers interact but can be a broad system where the transaction of
such instruments are transpired. It is commonplace for the investor and intermediaries establish a
partnership or bond by investment of money.

The different forms of markets are:

1) Stock market: Stock market in a site where the buying and selling of stocks takes place. Stocks are the
share of investors in a company. They are the capital raised by a company (which goes public) by issuing
shares. Initial Public Offering (IPO) is the process through which the private companies offer the public
and investors to buy shares on stock exchange. In case of profit of the company, the investors are to
receive dividend and might as well lose money to the financial loss of the company. It is a place where
billions of dolllars are getting transacted each day. Investors and public only invest in the company after
seeing its future prospect, plans and policies, managers, agenda, annual revenue, price to earning ratio.

2) Commodity Market: Commodity market is another form of market that we are familiar with. It is a
place where physical good are bought and sold. The types of goods sold can be broadly divided into two
types: hard commodities and soft commodities. Hard commodities refer to the natural resources which
can be bought and sold in raw form or the extracted resources such as gold, rubber, oil, gasoline and
many more. Whereas soft commodity are the final products exchanged in the market , such as: wheat,
meat, rice, beans, livestock. Commodity exchange is an organization or a legal entity which provides a
platform for commodity exchange along with which it makes rules and policies inside the market. A price
is fixed for which the consumers and sellers have to trade , manage foreign goods , assist merchandiser,
providing better investment opportunity in the market are some of its vital role. Merchandiser Exchange
Nepal(MEX) , Tokyo Commodity Exchange(TOCOM), Chicago Mercentile Exchange(CME), London Metal
Exchange, Chicago Board of Trade( CBOT) are some commodity exchanges in the world.

3) Forex Market: Forex Market also known as foreign exchange market and currency market is where the
exchange of foreign currencies take place. It is a liquid asset market in which the currencies are traded
according to the exchange rates of global market. Tt is the largest market in the world which consists of
central bank, commercial companies, forex dealers, retail forex dealers etc. The inestors are to sell the
currencies which might lose value in time whereas buy the currencies which are expected to grow about
the time. International trade and investments take place by using the forex market as a platform for the
transactions. The currencies are exchanged relative to one another. Free floating currency are those
whose value is determined by free market forces whereas fixed floating currencies are those which is set
according to the value of other countries. This market is open on all occasions for every hour of the day.

4) Derivative market: Derivative is a financial instrument which gains its value from an underlying
asset.The price or value of the instrument solely depends upon the performance of the asset. The good
performance of the asset increases the value of the derivate and vice versa.

Participants Of The Marktet:

Broker: A broker acts as a intermediate between the seller and buys. He is helpful for buying securities
from the investors and selling them in the market to potential buyers. A broker may be of a real estate
business or stock exchange. Nevertheless, it can never act as both buyer and seller and has to choose
one otherwise there will be a conflict of interest and it would also damage the loyalty of the broker. The
brokers are deemed convenient as well as advantageous because they know the market well, have better
conncection, know how to deal with situations, pitch in the right time and also help in choosing
favourable conditions for exchange too. A broker receive commission from the transaction made.The
brokers must be registered with “ Self-Regulatory Organization(SRO)”.

SRO( Self-regulatory Organizations): SRO are the private oraginization registered by the government.
They are formed from a network of members such as dealers, stock exchanges, registered fund dealer.
The main objective for the establishment of SRO is to make the transaction and deals ethical and
systematic working environment. It has the power to make rules and regulations under its concerned
market and have everybody follow it and also issue sanctions for non-compliance. They also help in
monitoring and minimizing financial frauds.SRO is expected to be more responsive to the changing
market situations than the government as well ass play a vital role to avoid unfair competition in the
market. . It also establishes standards that are not mentioned by the government.

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