Slide 1: FINANCIAL MARKETS

Slide 2: Introduction to Financial Markets

This slide serves as an introduction to the topic of financial markets. Here's a comprehensive
breakdown:

 Intermediaries: Financial markets act as intermediaries, facilitating transactions between

individuals and businesses with excess funds and those requiring funds.
 Economic Contribution: Savings directed towards financial markets provide essential funding for
individuals and businesses, promoting economic growth.
 Influence on Economy: Financial markets influence various economic factors such as the
availability of credit, savings attraction, and interest rates, ultimately shaping the economy's
trajectory.

Slide 3: Classification of Financial Markets

This slide categorizes financial markets based on different criteria. Here's what each classification
entails:

 Term or Maturity: Financial markets are classified into money markets (short-term instruments)
and capital markets (long-term instruments).
 Type of Issue: Financial markets are also classified based on the type of issue, distinguishing
between primary markets (original issues) and secondary markets (previously owned securities).

Slide 4: MONEY MARKETS

This slide focuses on money markets, which deal with short-term instruments. Here's a comprehensive
overview:

 Nature of Money Markets: Money markets facilitate the trading of short-term debt instruments
with a maturity of one year or less.
 Securities Traded: Instruments traded in money markets include Treasury Bills, bankers'
acceptances, negotiable certificates of deposit, and commercial papers.
 Characteristics: Money market securities provide higher yields than bank deposits, have low
default risk, and offer high liquidity, making them easily convertible to cash.

Slide 5: The Philippine Money Market

This slide delves into the specifics of the Philippine money market. Here's a detailed breakdown:
  Origin and Regulation: The Philippine money market began in 1965, primarily as a facility for
trading excess funds among commercial banks. The Bangko Sentral ng Pilipinas (BSP) regulates
the market and imposes daily cash reserve requirements on banks.
 Interbank Call Loans: Interbank call loans are used to fund temporary cash surpluses or deficits
among banks, allowing them to adjust their reserve positions.
 Regulatory Requirements: The Securities and Exchange Commission (SEC) requires corporate
borrowers in the money market to register their issues and seek credit ratings from the Credit
Information Bureau before registration.

Slide 6: CAPITAL MARKETS

This slide shifts focus to capital markets, which deal with long-term securities. Here's a detailed
explanation:

 Nature of Capital Markets: Capital markets facilitate the trading of long-term securities with a
maturity exceeding one year, including debt and equity instruments.
 Risk and Return: Unlike money markets, capital markets involve higher default and market risks
but offer higher returns.
 Assets and Participants: Long-term assets like land, buildings, and plant expansions are funded
through capital markets, with participants including security exchanges, investment banks, and
insurance companies.

Slide 7: The Capital Market Structure

This slide further explores the structure and components of capital markets. Here's a detailed
breakdown:

 Securities Markets: Capital markets comprise securities markets, where companies issue
common stocks or bonds to raise long-term funds. This allows for anonymous trading and
improved liquidity.
 Negotiated Market: In addition to securities markets, the capital market includes the negotiated
market, where companies obtain direct loans from lending institutions like banks. While less
liquid, these loans are still part of the capital market.
 Syndicated Loans: Syndicated loans, involving a group of banks collectively lending to a
borrower, are common in capital markets.
 Capital Raising: Companies can raise funds by issuing additional shares or bonds in the capital
market, providing a means for expansion and investment.
 Market Facilitation: Organized security exchanges, both domestic (e.g., Philippine Stock
Exchange) and international (e.g., American Stock Exchange), along with electronic exchanges
like the US Futures Exchange (USFE), facilitate trading in capital markets.
Slide 8: PRIMARY MARKETS

Primary markets are where new securities are issued for the first time, allowing corporations to raise
funds by selling stocks or bonds to initial investors. Here's a detailed look at primary markets:

 Key Players: Primary markets involve underwriters, issuers (companies), and financial
instruments (stocks or bonds).
 Purpose: These markets raise funds for companies through the issuance of equity (stocks) or
debt securities (bonds).
 Financial Instruments: Stocks represent ownership in a company and entitle holders to
dividends, while bonds are debt instruments with fixed interest rates and maturity dates.
 Role of Investment Banks: Most primary market transactions are facilitated by investment
banks, also known as merchant banks, which help companies sell stocks or bonds to investors.

Slide 9: PRIMARY MARKET OPERATIONS

Here are the primary market operations and functions:

 Underwriting Process: Investment banks purchase all shares issued by the company in an
underwriting transaction and then resell them to the public.
 Role of Underwriters: Underwriters do not keep the shares or bonds for themselves; instead,
they earn a commission for facilitating the transaction.
 Types of Issues: Primary market issues can be public offerings or for publicly traded securities,
with initial public offerings (IPOs) representing first-time issues for the public.
 Advisory Services: Investment banks provide advice to issuing companies on pricing and the
number of securities to issue, helping them navigate the market.

Slide 10: SECONDARY MARKETS

Secondary markets involve the trading of currently outstanding securities, providing liquidity for
investors. Here's an overview of secondary markets:

 Definition: These markets facilitate the resale of previously issued securities, allowing holders to
sell securities to other investors.
 Transaction Timing: Secondary market transactions occur after the initial issue in the primary
market and do not raise funds for the issuing company.
 Liquidity Provision: Secondary markets provide liquidity, allowing holders to sell securities at
any time, and involve major players like commercial banks, investment houses, and finance
companies.
Slide 11: SECONDARY MARKET OPERATIONS

Here are the key operations and functions of secondary markets:

 Role of Brokers and Dealers: Security brokers find buyers for securities owned by others,
earning commissions, while security dealers buy and resell securities for profit.
 Market Facilities: Facilities like the Philippine Stock Exchange (PSE) provide trading services, but
not all transactions pass through it.
 Stock Indices: Classification of stocks into boards enables calculation of stock indices, reflecting
price levels of selected stocks and serving as a track record of changes in stock prices over time.

Slide 12: REPORTING AND DATA

Here's a breakdown of the reported data from the Philippine Stock Exchange (PSE):

 Price Reporting: Prices reported include open, low, high, and close prices at the end of a trading
day.
 Volume and Range: Other reported data include volume of shares traded, price range during
the year, earnings per share, and dividends per share.
 Understanding Stock Prices: A company's stock price does not solely represent its investment
value; other factors like income, dividends, and capital gain contribute to its value.