Question

Discuss three (3) different financial markets. Indicate any requirements to be a member and other specifics This needs to be submitted as a Word document

Answer 1

THREE DIFFERENT FINANCIAL MARKETS

1. STOCK MARKET: Corporations raise large amount from public by giving their units from company called shares. When a person acquires more shares, it is called stock. Thus, Stocks are shares of ownership of a public corporation that are sold to investors through broker-dealers. The investors profit when the companies increase their earnings through dividends

Listing Requirements:

Listing requirements are a set of conditions which a corporation must meet before listing a unit/ share on one of the organized stock exchanges

For Example, In case of New York Stock Exchange the following are the requirements to become a member of the stock exchange:

• STEP 1: Membership: To qualify as a member, a firm needs to register itself as a registered and new US based broker dealer to obtain SELF REGULATORY ORGANIZATION in order to have a established connection to a clearing firm. The most important point is that individual investors are not eligible to gain membership
• STEP 2: PROCESS: Filling in necessary applications and submitting relevant documents directly to Client Relationship Manager is the important process
• STEP 3: CONNECTIVITY: Firms can start connecting to market directly or through Service Bureaus once membership application and processes are completed

2. BOND MARKET: also called credit market in which organizations obtain large loans. In other words if members issue new debt, it is known as primary market. If they buy or sell securities already prevalent in the market, it is called secondary market. Large corporations obtain large loans as a part of long term funding.

Requirements to become a member can be explained through different types of bonds available in the market

Corporate Bonds: Corporates provides bonds to public to raise money either to expand their operations or for further financing. It must have a maturity period of one year or more

Government Bonds (Treasury Bonds): They issue bonds in order to fulfill the services and welfare measures projected to the public. They entice buyers by agreeing to pay the face value on agreed maturity date with definite interest payments

3. COMMODITIES MARKET: Where corporates offset their risks in future when buying or selling resources like oil, coffee, corn, gold etc which are volatile. They can lock in a price on these commodities today. Different types of commodities include metal categories, energy categories and livestock and meat categories. Commodity futures and commodity options are the prevalent types of commodity trading followed in various stock exchanges