STRUCTURE OF THE FINANCIAL

MARKET

RISHELLE MAE C. ACADEMIA

All national and international markets make up the financial market. It
incorporates banks, funds (pension, insurance, currency), and many
other economic institutions that help accumulate and redistribute
money.

As a complex system, the financial market has a multilevel structure

that includes 5 market segments: foreign exchange market, credit
market, insurance market, investment market, and securities
market. As you can imagine, the Forex currency market represents one-
fifth of the financial market.
Debt Market

The debt market, or bond market, is the arena in which investment in loans
are bought and sold. There is no single physical exchange for bonds.
Transactions are mostly made between brokers or large institutions, or by
individual investors.

Equity Market

Equity, or stock, represents a share of ownership of a company. The owner

of an equity stake may profit from dividends. Dividends are the percentage
of company profits returned to shareholders. The equity holder may also
profit from the sale of the stock if the market price should increase in the
marketplace.
Financial Markets

Financial markets refer broadly to any marketplace where the trading of securities
occurs, including the stock market, bond market, forex market, and derivatives
market, among others. Financial markets are vital to the smooth operation of
capitalist economies.

Stocks Markets

The term stock market refers to several exchanges in which shares of publicly held
companies are bought and sold. Such financial activities are conducted through
formal exchanges and via over-the-counter (OTC) marketplaces that operate
under a defined set of regulations.
Stocks of Exchange

A stock exchange is an important factor in the capital market.

It is a secure place where trading is done in a systematic way.
Here, the securities are bought and sold as per well-
structured rules and regulations. Securities mentioned here
includes debenture and share issued by a public company
that is correctly listed at the stock exchange, debenture and
bonds issued by the government bodies, municipal and
public bodies.
Functions of Stock Exchange

Following are some of the most important functions that are performed by stock
exchange:

1. Role of an Economic Barometer

2. Valuation of Securities
3. Transactional Safety
4. Contributor to Economic Growth
5. Making the public aware of equity investment
6. Offers scope for speculation
7. Facilitates liquidity
8. Better Capital Allocation
9. Encourages investment and savings
 THE PHILIPPINE HISTORY OF STOCK EXCHANGE

On February 3, 1936, the Securities and Exchange Commission announced that it had "relinquished control
of the Manila Stock Exchange.“ The Philippine Stock Exchange was formed on December 23, 1995, from the
merger of the Manila Stock Exchange (MSE) (established on August 12, 1927, based on Muelle de la
Industria, Binondo, Manila) and the Makati Stock Exchange (MkSE) (established on May 15, 1963, based in
the Makati Central Business District, within Ayala Tower One). Both exchanges traded the same stocks of
the same companies.

In June 1998, the Securities and Exchange Commission (SEC) granted the PSE a "Self-Regulatory
Organization" (SRO) status, which meant that the bourse can implement its own rules and establish
penalties on erring trading participants (TPs) and listed companies.

In 2001, the PSE was transformed from a non-profit, non-stock, member-governed organization into a
shareholder-based, revenue-earning corporation headed by a president and a board of directors and on
December 15, 2003, listed its own shares on the exchange (traded under the ticker symbol PSE).

On March 28, 2022, The Philippine Stock Exchange launched the PSE Thematic Index Series, with two new
indices, namely PSE Dividend Yield Index, and PSE MidCap Index.
Formal Markets 

In the formal market, each seller has a fixed location; i.e. a store. In order to
attract buyers, formal sellers advertise their posted price and location. The
location and the price of each seller are common knowledge. In order to
capture these market features, we use the directed search framework of
Burdett et al. (2001). Each buyer in the formal market can visit one seller per
period, and buyers’ visits of sellers are not coordinated. Buyers are more
likely to visit the seller with the lowest posted price. But since buyers are not
coordinated, they may face more competition at these locations. If multiple
buyers choose to visit the same seller, then only one of the buyers can
purchase the good, while the rest of buyers receive a payoff of 0. On the other
hand, if no buyers visit a seller, then he cannot sell his good, so he receives a
payoff of 0.
 OVER THE COUNTER MARKETS

An over-the-counter (OTC) market is a decentralized market in which

market participants trade stocks, commodities, currencies, or other
instruments directly between two parties and without a central exchange
or broker. In an OTC market, dealers act as market-makers by quoting
prices at which they will buy and sell a security, currency, or other
financial products. A trade can be executed between two participants in an
OTC market without others being aware of the price at which the
transaction was completed.
Government- Government holds much sway over the free markets. The fiscal and monetary
policies that governments and their central banks put in place have a profound effect on the
financial marketplace.

International Transactions- The flow of funds between countries affects the strength of a
country's economy and its currency. The more money that is leaving a country, the weaker the
country's economy and currency.

Speculation and Expectation- Speculation and expectation are integral parts of the financial
system. Consumers, investors, and politicians all hold different views about where they think
the economy will go in the future, and that affects how they act today. The expectation of future
action is dependent on current acts and shapes both current and future trends.

Supply and Demand- Supply and demand for products, services, currencies, and other
investments creates a push-pull dynamic in prices. Prices and rates change as supply or demand
changes. If something is in demand and supply begins to shrink, prices will rise. If supply
increases beyond current demand, prices will fall. If supply is relatively stable, prices can
fluctuate higher and lower as demand increases or decreases.