Let’s look at the next main important topic, which is FEATURES.

FEATURES OF FINANCIAL MARKETS

Can anyone give me the characteristics or Features of financial markets?

• Act as a Link
So, a link is nothing but a person who connects two polls on two different entities. So in
financial markets they connect investors to the borrowers and bridge the gap between the two
for mutual benefits.
Ex. Let’s say for example in a stock market kung saan you buy and sell or invest your money into
the shares.
Why do people invest? and why does the company need investors?
(People invest because they wanted their money to grow and company need investors to have
capital, so merong mutual benefits for both the investors and the company)
So financial market act as a link to connect the investors to the borrowers.

• Easy Accessibility
These markets are readily available anytime for both the investors and the borrowers. Financial
markets provide the potential buyer and seller easily which helps them in saving their time.
Ex. Kung ikaw ay business man syempre kailangan mo ng pera to start your own business tpos
kung ikaw naman ay isang investor naghahanap ka ng magandang company na pag iinvestan
mo. And as an investor iniisip mo yung return nung investment mo that’s why it takes a lot of
effort and research but since there is financial market, we have easy access to those
information. So the investors can easily look into the performance of the company.

• Trades in marketable and non-marketable securities

Financial markets initiate buying and selling of marketable commodities. Some of these are
bonds, debentures, and shares along with non-marketable securities like bank deposits, post
office deposits and other loans and advances.

• Government Rules and Regutations

The government controls the operations of a financial market in the country by imposing
different rules and regulations.

• Involves Financial Intermediaries

what is financial intermediaries and why is it important in the financial market?
( Financial Intermediaries is an institution, such as a bank, building society, or unit-trust
company, that holds funds from lenders in order to make loans to borrowers. They lower the
cost of doing the business)
These markets requires financial intermediaries because it serves as a middle men for financial
transactions which helps create efficient markets and lowers the cost of doing the business. kasi
kahit wala kang pang Capital at gusto mo magtayo ng business pwede kang maghanap ng
investors na makaktulong sayo.

• Deals in long and short term Investments

For investors financial market provide an opportunity of putting their funds into various
securities for short or long term investments.

Let’s now move on to the functions of Financial Markets

Can anyone give me the different functions of Financial markets?
• Price Determination
The prices at which the financial instruments trade in financial market are determined by
the market forces.
So ano nga yung market forces na yun? Yung main forces that drives the market?
Diniscuss ito sa atin sa economics.
(Demand and Supply)
Ano ba yung law of Demand?
( when the price goes up the quantity demanded goes down, and when the price goes down
the quantity demanded goes up)
Ano naman yung law of supply
(as price increases quantity supplied increases, and when the price falls quantity supplies falls)
That’s why in the financial market it provides the vehicle by which prices are set for both
financial assets.

• Fund Mobilization
Along with determining the prices at which the financial instruments trade in the financial
market, the required return out of the funds invested by the investor is also determined by
participants in the financial market. The motivation for people seeking the funds is dependent
on the required rate of return, which the investors demand.

• Liquidity
What is Liquidity?
(this is the ability of an instrument to convert itself into liquid cash or an immediate
currency.)
 (refers to the case with which the assets can be converted into ready cash without
affecting its market price)
So dito sa liquidity naman it provides an opportunity for the investors to sell their financial
instruments at their fair value at anytime.
Ex. Sa stock market there are no restrictions whether ihohold mo siya for 1 month, 1 year, 2
years, etc. or kung gusto mo after 1 month I sesell mo na kaagad siya. Therefore, this means
that in financial market we get the opportunity to sell the equity shares and convert them
quickly into liquid cash. So, mabilis siya ma coconvert in case of emergency or kung kailangan
mo ng pera.

• Risk Sharing
Ano ba yung sinasabing risk sharing? Or it is also known as risk distribution, do
you have any idea?
the market performs the function of risk sharing as the person who is undertaking the
investment are different from the person who are investing their fund to those investments.
Ex. yung investor pwede maging kahit sino, pwedeng student, employee, etc. halimbawa nag
invest ka sa isang company ng 1,000,000 tpos biglang na bankrupt yung company na iyon, yung
1 million mo mawawala yun. Pero kung nag invest ka halimbawa ng 300,000 dito sa isang
company tas another 300,000 naman doon sa isa, another 300,000 naman sa other company
ma bankrupt mn ang isa kaunti lang ang mawawala sayo kasi inallocate mo siya sa different
entities. Kaya ibig sabihin you share your risk in different avenues.

• Easy Access

• Reduction in transaction Cost

diba yung trader kailangan niya ng mga information para magawa yung transaction of buying
and selling of securities. So, yung financial market siya yung tumutulong to provide the type of
information na kailangan nung trader without the requirement of spending money. Kaya’t sa
pamamagitan nito nababawasan yung cost of transaction.