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CLASS :12 ( COMMERCE) Subject - Business studies
MEANING:A FINANCIAL MARKET IS A MARKET FOR THE CREATION AND EXCHANGE OF FINANCIAL ASSETS, SUCH AS SHARES, DEBENTURES, BONDS , ETC.
IT MAIN AIM AT BRINGING TOGETHER BORROWERS AND LENDERS OF FUNDS.
FINANCIAL MARKET
1. Mobilizes funds. 2. Facilitates price discovery 3. Provides liquidity to financial assets 4. Reduces the cost of transaction
Functions of Financial Market
THERE ARE TWO MAJOR TYPES OF FINANCIAL MARKETS ARE
Capital market which deals in long-term and medium –term funds.
Financial market which deals in short term funds.
TWO MAJOR SEGMENTS
Treasury bill: Instrument of short term borrowing issued by the RBI on behalf of Indian Government
Commercial bill: Short term instrument used to finance working capital requirement of the business.
Commercial Paper: Unsecured instrument issued in the form of Promissory note.
Money Market Instruments
Certificate of Deposit(CD): Bearer document issued by commercial banks and development financial institutions against deposits kept by companies, individuals and institutions with them.
Call money: Short finance generally used by banks to maintain Cash Reserve Ratio(CRR).
Reserve Bank of India Non Banking Finance Companies Large Corporate Houses Commercial Banks State Government Mutual Funds
Participants of Money Market
Primary Capital Market: It refers to market where securities are sold for the first time.
Secondary Capital Market: It refers to market for sale and purchase of previously issued securities.
Types of Capital Market
There are different methods of floating new issues in the primary market.
Offer through Prospectus E-IPO Offer for Sale Private Placement Right Issue
Methods of FLOATATION
A stock exchange is an institution which provides a ready market for buying and selling of existing securities, i.e. , shares, Stocks, bonds, debentures ,etc.
Stock Exchange
Provides marketability and liquidity to existing securities
Pricing of Securities Safety of Transaction Contribution to economic growth Spreading equity cult
Its functions
Selection of a broker Opening D-mat account Placing order Execution of order Settlement
Trading Procedure
Security and exchange Board of India was setup in1992 to regain the trust of all investors and to protect their interests and to control and regulate business of stock exchange.
SEBI
To provide a fair, efficient and transparent security market
To enable shorter settlement cycle To meet modern global standards of
securities market. To introduce various reforms for proper
working of Indian Securities market
OBJECTIVES
Regulatory Functions Development Functions Protective Functions
FUNCTIONS of SEBI