Home > Posts > Economics > Participants in The Financial Market

Participants in The Financial Market

In the financial market, there are many concepts and standards that should be followed by institutions participating in the financial markets. Therefore, in this article, we will present to you some of the institutions involved in the financial market and we will talk about them in detail.

Participants in the Financial Market

Banks

In the capital Market, (which is a market for financial investments that are direct or indirect claims to capital. It is wider than the Securities Market and embraces all forms of lending and borrowing, whether or not evidenced by the creation of a negotiable financial instrument) banks are participating. banks take an active part in bond markets. They may invest in equity and mutual funds as a part of their fund management. 

Insurance Companies

The principal aims of the participants are to show the causes of institutional growth, the nature of institutional investors and the implications of their activities and growth.  The participants draw on material from interviews with fund managers, econometric and statistical analysis, and studies of the individual countries’ financial sectors.

Primary Dealers (PDs)

They are a firm that buys government securities directly from a government, with the intention of reselling them to others, thus acting as a market maker of government securities. The government may regulate the behaviour and number of its primary dealers and impose conditions of entry.  Their basic responsibility is to provide two-way quotes and act as market makers for government securities and strengthen the government securities market.

Stock Exchanges

They are a series of exchanges where successful corporations go to raise large amounts of cash to expand. Stocks are shares of ownership of a public corporation that are sold to investors through broker-dealers. The investor’s profit when companies increase their earnings. It is essential that stock ex­changes are corporatised and de-mutualised so that there can be greater transparency in the trades and better governance in markets.

Custodians

They are a specialized financial institution responsible for safeguarding a firm’s or individual’s financial assets and is not engaged in “traditional” commercial or consumer/retail banking such as a mortgage or personal lending, branch banking, personal accounts, and Automated Teller.

Brokers

They usually arrange loans for a fee. They deal with the lenders for you and arranges a loan. They help build up order book, price discovery and are responsible for a contract being honoured. For their services, brokers earn a fee known as brokerage.

Financial Institutions 

Organizations and institutions in the public and private sectors also often sell securities on the capital markets in order to raise funds. They provide/lend long term funds for industry and agriculture. FIs raise their resources through long-term bonds from the financial system and borrowings from international financial institutions like International Finance Corporation.

Depositories

They serve multiple purposes for the general public. As banks and other financial institutions, they give consumers a place to come in order to make deposits both time or demand deposits. Deposits can also come in the form of securities such as stocks or bonds. On instructions of stock exchange clearing house, supported by documentation, a depository transfers securities from buyers to sellers’ accounts in electronic form.

Merchant Banks

It a bank dealing in commercial loans and investment. Merchant banks were the first modern banks and evolved from medieval merchants who traded in commodities, particularly cloth merchants.