Professional Documents
Culture Documents
• Refers to channels or
places where funds and
financial instruments such
as stocks, bonds, and
other securities are
exchanged between
willing individuals/entities.
Exchanging of
financial instruments is
commonly known as
“trading”. Popular
examples of financial
markets are New York
Stocks Exchange and
Philippine Stocks
Exchange (PSE)
THREE MAJOR ECONOMIC FUNCTIONS OF
FINANCIAL MARKET
1. PRICE DISCOVERY – interaction between a seller and the buyer in order to
come up with price of the traded financial instrument.
2. LIQUIDITY
3. REDUCTION IN TRANSACTION COSTS
TYPES OF FINANCIAL MARKETS
• Based on
Market Type :
1. Primary
2. Secondary
ECONOMIC FUNCTIONS OF SECONDARY MARKET
INCLUDE :
1. Price Discovery – Secondary Markets provide about information about
prices of securities. The higher the price of securities in secondary market,
the higher the price that the issuing companies can set on new securities that
they will issue.
2. Liquidity and reduction in borrowing cost – Parties who want to buy and sell
are equally matched.
3. Support to the primary market – price discovery helps in giving information.
ECONOMIC FUNCTIONS OF SECONDARY MARKET
INCLUDE :
3. Support to the primary market – price discovery helps in giving information.
4. Implementation of monetary policy – secondary market allows regulators
such as BSP to trade securities to influence liquidity and interest rates set in the
financial system.