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CM101 - D&B - Securities Overview

CM101 - D&B - Securities Overview

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 Introduction & Overview of Securities Industry
1
FDN-CM101-DB
 
Study Material for Introduction & Overviewof Securities Industry
 
 
 Introduction & Overview of Securities Industry
2
Table of Contents
Introduction & Overview.....................................................................................................3
 
Financial Markets................................................................................................................3
 
What are Financial Markets?............................................................................................3
 
Objectives of Financial Markets........................................................................................4
 
Participants in the Financial Markets.................................................................................6
 
Investors...........................................................................................................................7
 
Issuers............................................................................................................................10
 
Financial Intermediaries..................................................................................................12
 
Infrastructure Providers...................................................................................................25
 
Industry Bodies................................................................................................................34
 
Asset Classes....................................................................................................................36
 
Equity..............................................................................................................................37
 
Fixed Income Securities..................................................................................................38
 
Currencies.......................................................................................................................39
 
Commodities...................................................................................................................40
 
Derivatives......................................................................................................................41
 
Types of Risks.................................................................................................................42
 
Types of Markets...............................................................................................................44
 
Primary Market and Secondary markets..........................................................................44
 
Money and Capital Markets.............................................................................................45
 
Markets for Financial Instruments....................................................................................47
 
Role of Regulators............................................................................................................51
 
Securities and Exchange Commission (SEC):.................................................................51
 
Financial Services Authority (FSA)..................................................................................56
 
Recent Developments in Financial Services Industry....................................................59
 
Dematerialization.............................................................................................................59
 
Electronic Trading...........................................................................................................59
 
Web Trading....................................................................................................................60
 
Electronic Communications Networks.............................................................................60
 
Financial Messaging........................................................................................................60
 
Shortening of Settlement Cycles.....................................................................................62
 
GLOSSARY........................................................................................................................62
 
Sample Questions: US Securities Markets - Introduction and Overview......................67
 
 
 
 Introduction & Overview of Securities Industry
3
Introduction & OverviewFinancial Markets
 What are Financial Markets?
In any economy, entities such as individuals, organizations and governments may havesurplus funds or may need funds for a variety of purposes. Thus funds need to beexchanged between those who have surplus of them (
called savers/investors/lenders
) andthose who need them (
called issuers/borrowers
). Broadly speaking individuals are theprincipal savers while organizations and governments are principal borrowers or fundraisers.
1
This transfer of funds takes place through a mechanism of financial markets.
Individual Investors Fund / Capital Raisers
Funds areInvest funds through transferred to
 What are financial assets or securities?
When investors lend their surplus funds to organizations or governments, investors get anacknowledgement for the same from organizations or governments in the form of financialsecurities. Thus financial securities are issued by those who need capital
2
and represent thefact that such issuers have raised funds from investors. For the investors who have investedin such securities, such securities become financial assets. These financial assets represent aclaim on the issuer’s earnings or resources. The issuers have certain obligations towards theinvestors, the most important among them being providing a return on their investments.
1
The classification of individuals as investors and organizations and governments as fund raisers is only abroad one. This is because individuals do borrow funds and organizations and governments do invest or lendfunds.
2
Capital is the amount of monetary resources required to run the business
FinancialMarketsOrganizationsOrGovernments

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