GLOBAL CAPITAL MARKET & THEIR EFFECTS

CHAPTER - I
INTRODUCTION
A capital market is a market for securities (debt or equity), where business enterprises (companies) and
governments can raise long-term funds. It is defined as a market in which money is provided for periods
longer than a year, as the raising of short-term funds takes place on other markets (e.g., the money
market). The capital market includes the stock market (equity securities) and the bond market (debt).
Financial regulators, such as the UK's Financial Services Authority (FSA) or the U.S. Securities and
Exchange Commission (SEC), oversee the capital markets in their designated jurisdictions to ensure that
investors are protected against fraud, among other duties. Capital markets may be classified as primary
markets and secondary markets. In primary markets, new stock or bond issues are sold to investors via a
mechanism known as underwriting. In the secondary markets, existing securities are sold and bought
among investors or traders, usually on a securities exchange, over-the-counter, or elsewhere.

CHAPTER - II
INTERNATIONAL CAPITAL MARKET
International Capital Market is define as a cluster of closely integrated market which deals in different
types of financial as well as physical assets including stocks, bonds, and bank deposits denominated in
different currencies. Commodities like Petroleum Gold Silver Platinum Derivatives instrument like
borrowed contracts, futures, options, swaps, real estates, etc.
International Capital Market is that financial market or world financial center where shares, bonds,
debentures, currencies, hedge funds, mutual funds and other long term securities are purchased and
sold. International capital market is the group of different country's capital market. They associate with
each other with Internet. They provide the place to international companies and investors to deal in
shares and bonds of different countries.

After invention of computer and Internet and revolution of financial market in 2010, almost all
financial markets are converted in international capital markets. We can give the example of Hong Kong,
Singapore and New York world trade centre. International capital market was started with dealing of
foreign exchange. After

globalization of financial sector, companies have to take certificate for dealing in international market.
Suppose, Indian company wants to sell shares in France, for this, Indian company should take certificate
named global depository receipt (GDR).

International capital market's daily turnover has crossed $ 5 trillion. International capital market is
very helpful for reducing the risk of small company because in international market, you can buy
different countries companys shares, debentures and mutual funds. Different countries have different
business environment, so if any country is facing loss and due to financial crisis, your investment in that
country may suffer losses but you can fulfill this loss from other country's investment. So, overall risk will
be reduced by this technique.

CHAPTER - III
Factor responsible for growth of International Capital Market
i. We are in the Era of floating exchange rate. Before the current floating rate system
there was a system of gold parity and fixed exchange rate system. Floating exchange rate system is one
of the most important reasons for growth of International Capital Market.
ii. Due to growth of Globalisation, Privatisation and Libralisation and integration of world
economy there has been tremendous growth of International Capital Market.
iii. Almost all nations have lifted controls from capital flow which is one of the factors for
growth of ICM.
iv. Political stability is important return for the growth of ICM.
v. Advancement in communication Technology and Transports.
vi. The cold war between sovient union and US is one of the reasons for the growth of
ICM.
vii. Security, Liquidity and Return.
viii. Integration with Global Financial Market.
ix. Reduction in price difference.
x. Growth in international trade due to efforts of GATT and WIO.
xi. There are also two more different factors responsible for the growth of ICM.

a) Pull Factor
b) Push Factor
a) Pull Factor:-
A pull Factor attract investor to make investment in particular country for verity of reasons.
b) Push Factor:-
A push factor forces the investor to leave his country and to search for alternative, destination of verity
of reasons.

Feature of International Capital Market
i. In International Capital Market every country are Closely Integrated with each other.
ii. International Capital Market usually deals in Huge Volume.
iii. In ICM there are number of Participants.
iv. Biggest financial intermediately which takes resources and deploy resources.
v. Foreign Exchange Market is an important part of the ICM.
vi. ICM comprises of International Bond Market and Euro Bond.

Role of International Capital Market Association (ICMA) for International Capital Market

i. Development and maintenance of high standard of market practices.
ii. To formulate and implement appropriate regulation.
iii. Educating market participants and others through training and research.
iv. Facilitating communication and establishing information forum.
v. Promoting good standards of transparency fair play, accountability between the
members.
vi. Help member in legal cost and promotion of self regulation.
vii. Help market to develop and operate efficiently.
viii. Setting market practices, standards and promotion of market related initiative.

REGULATORY BODIES IN INTERNATIONAL CAPITAL MARKETS
International primary market association (IPMA) was formed as an independent trade
association in 1934 for leading underwriters of international issues of debt & equity. IPMA was the main
organization dealing with new issue procedure in euro markets. IPMA original role was harmonization &
the establishment of best practices in the primary market. IPMA was neither an exchange nor a
regulator. IPMAs rules take the form of recommendation based on general agreement of the measure
underwriters. Members are free to disapply them, but otherwise they are presumed. Agreement is
secured by philosophy of consensus. IPMA had no power to sanction. IPMA was merged with
international securities market association (ISMA) in July, 2005. The merger created a new body known
as international capital market association (ICMA).
ICMA is a trade association & a self-regulatory body. ICMAs members include banks, financial
institutions, underwriters, issue managers, institutional investors & borrowers.
ICMA is a representative body for all capital market constituents in European markets.



International Primary Market Association

The international primary market association (IPMA) is the organization that represents the lead
managers of equity and debt securities in the international capital market. The prime objective of the
association is to achieve a harmonized primary capital market in Europe. Providing an appropriate level
of protection to the investors of Europe is another objective of the association.
The association is based in Europe and takes care of the primary capital market in Europe. The working
document that is presented by the association takes care of the instructions given by CESR's "level 2
advices. But in some cases the specifications given by CESR are not followed. The working document
given by the international primary market association considers those issues that may come critical to
the operation of European capital market.
The comments made by the association working document reflect the views of the association's
members. The members of international primary market association are the major banks and financial
institutions of Europe that are active in the capital market. The member institutions have expressed
their concerns with the association as issuers and investors.



There are various activities of international primary market association. Some of them are listing of new
stock securities, listing of new debt securities and also granting limited temporary exemptions for
existing debt securities. The conditions for temporary exemptions of the securities specified by the
directive are - the issuer can have only debt admitted to trading on the regulated market, the issuer
actually is only exempt from half-yearly disclosure but not from annual or interim disclosure and that
the exemption is applicable only for seven years.


Background of International Primary market Association

Since its launch in 1985, the IPMA Handbook has grown from a few short pages
covering the issuance of straight Eurobonds to a comprehensive document
covering a broad range of international securities. It is very much a live
document, continuously responding to market developments when guidance
or standardisation is required. The most recent additions to the IPMA
Handbook can be found here.

The International Primary Market Association (IPMA) merged with the
International Securities Market Association (ISMA) in July 2005, creating the
International Capital Market Association (ICMA).

However, continues to be referred to as the "IPMA pending any consolidation
into a single handbook of the rules and recommendations of the former IPMA
and ISMA. Similarly, the recommendations, standard documentation, guidance
notes, etc., contained in the IPMA Handbook continue to be referred as IPMA
recommendations, standard documentation, guidance notes, etc. Generally,
the IPMA Handbook is intended to apply to cross-border issues of securities
lead-managed by ICMA members, who are presumed (except as stated to the
contrary in the relevant syndicate invitation) to be applying relevant


IPMA Recommendations (further detail is set out within the IPMA). Oversight
of the IPMA Handbook rests with ICMAs Executive committee acting on the
advice of the ICMA Primary market practices sub-committee and the ICMA
Legal and documentation sub-committee.











International Capital Market
Association

Over the past 40 years, ICMA has made a significant contribution to the development of the
international capital market. Since the beginning of the Euromarkets, ICMA has facilitated the
interaction between issuers, lead managers, dealers and investors for the benefit of an efficient and
well-functioning security market.

From its beginning as a modest offshore market, the international capital market has grown into a broad
and deep market of around 10 trillion serving the needs of governments, supranational and corporate
from all over the world. From year to year, decade to decade, the market has expanded dynamically
across all geographical and product areas, helping the free movement of
capital across borders and the integration of economies, removing obstacles and building bridges linking
the different national markets together, and enhancing structural reform and monetary integration.

ICMA in its activities was very often the frontrunner in creating the framework of cross-border issuing,
trading and investing, and has constantly helped to build the relationship amongst all market
participants. As a trade association, ICMA has initiated numerous sets of standard practices to help
develop efficient and well-functioning markets, and through its research and educational activities as
well as organisation, has increased the links between institutions from all over the world.

ICMA has never understood itself as an advocacy or lobbying organisation, but as an association with the
objective of finding practical solutions in the steadily changing political and economic financial
framework. ICMA is and was always a strong voice in the promotion of free capital flows across borders
and all other efforts on the long road to integrated capital and financial markets. In this effort, ICMA was
a partner of regulatory and other governmental/monetary institutions helping them in the achievement
of very ambitious objectives. Promoting best practices and standards, contributing to education,
helping supervisory authorities and furthering the links between its members, was and is ICMAs
mission.

For the benefit of all market participants, ICMA concentrates on market questions and solutions, not
on the self-interests of any particular segment of financial institutions. It is in this spirit that ICMA
developed a commercial activity, TRAX, which serves the market extremely well in data provision, until
the activity was put into the professional hands of Euroclear, one of the markets most important
infrastructure providers. The dynamic development of the international capital market and accelerated
globalisation has led to evermore complex markets with many new asset classes, which pose

market related, legal and practical challenges to market participants as well as supervisory and political
authorities. The international market has therefore, on the one hand, seen many new trade associations
active in particular segments of the market and, on the other hand, seen some consolidation among
associations in other segments. In debt capital markets, ICMA continues to play a major role, particularly
due to its unmatched geographical and institutional diversity. As a cross-border association, ICMA
sponsors and brings together sell and buy side, works on the improvement of the legal framework and
continues to see its mission to service
the market as a whole.

The events of the last 12 months have brought to light severe deficiencies in many areas of the capital
market (documentary, legal, market practices etc), which compels ICMA to increase its efforts in order
to help heal the damage done in what has to be considered a major market failure with all its economic
and political consequences.
ICMA has and will continue to operate on a consensual basis in respect of regional, national or
institutional diversity. ICMA is convinced that it is only cooperation which will allow us to continue to
build the international markets and create a better infrastructure for the distribution of capital.


What the International Capital Market Association does?

ICMAs mission is to make sure that the international capital market works as efficiently as possible and
to promote best market practice by: maintaining

The framework of cross border issuing, trading and investing through development of internationally
accepted standard market practices.

Liaising closely with governments, regulators, central banks and stock exchanges, both at national and
international level, to ensure that financial regulation promotes the efficiency and cost effectiveness of
the international capital market.

Encouraging networking, flow of information and the organisation of market events.

History of International Capital Market Association

The growing challenges of globalisation and consolidation in the banking sector, together with
increasing regulatory activity, led to the formation of the International Capital Market Association in July
2005 through the merger of ISMA and IPMA, creating an organisation with a broad franchise across the
primary and secondary International Capital Markets.

The driving force behind the creation of the Eurobond market was an unfavorable tax regime introduced
in the USA in the early 1960s, effectively forcing international borrowing in US dollars offshore. The first
Eurobond is generally considered to have been an issue by Autostrade in 1963. The Association was
established in 1969 by a group of bond dealers representing banks and securities firms, as the
Association of International Bond Dealers (AIBD), in response to a settlement crisis which threatened
what was then the new Eurobond market.

In the years that followed, AIBD enacted a series of rules and recommendations governing market
practice, thereby providing the stability and order essential for the continuing development of the
international capital market. In the 1980s AIBD began to provide data


services to the market and in 1989 launched the transaction matching, confirmation and regulatory
reporting system, known as TRAX. The International Primary Market Association (IPMA) was founded in
1984 by major banks to provide sound basic recommendations for the primary capital market. In 1992
AIBD changed its name to International Securities Market Association (ISMA). ICMA sold its market
services business, including TRAX, to Euro clear in April 2009.

Regulatory Policy and Market Practice

ICMA provides services for members through its regulatory policy and market practices activities in
Europe and beyond by:
setting standards of good practice for orderly markets, in consultation with members (which also
means membership is seen as a seal of approval by their peers, supervisors and regulators);
consulting members and representing members views to other constituencies, notably to
regulators and central banks on cross-border regulatory issues, but also to other market participants;
providing a pan-European focus;
representing the sell side and buy side together, where they agree, and facilitating dialogue
between them;
working in cooperation with other trade associations, where it is in ICMAs members interests;
and
Sharing ICMAs experience of setting standards of good market practice in Europe with trade
associations and self-regulatory organizations in other parts of the world.
ICMA concentrates on cross-border, rather than domestic, regulatory and market practice issues
because that is where, as a trade association with a pan-European focus; ICMA can add most value for
its members.


ICMA works as closely as possible with members through its regulatory policy and market practices
committees (and related working groups) which enable interested members to provide expert input into
ICMAs regulatory policy and market practices work; and they also act as a forum for discussion and
reaching a consensus on topics of common interest. The ICMA Regulatory Policy Committee oversees all
ICMAs regulatory policy and market practices work. It consists of the government affairs, regulatory and
compliance heads in member firms.
ICMA communicates with its members on regulatory policy and market practices issues through its
Regulatory Policy Newsletter, this area of the website and through seminars and conferences.

Rules and Recommendations

ICMA has issued a series of rules and recommendations for members to comply with and observe in
their dealings with counterparties around the globe.

ICMA's rules and recommendations for the secondary market form a reliable framework for trading debt
related securities (both between members as well as between members and other professional market
participants) and for the clearing and settlement of securities.

The IPMA Handbook is a comprehensive document covering the issuance of bonds, international
equities and continuous offerings. The Handbook is very much a live document, continuously
responding to market developments when guidance is required.

ICMA has also been instrumental in producing standard documentation for the repo market which can
be found in this section of the website. Access to some of the pages within this section is restricted to
ICMA members and other subscribers.

Committees, Councils and Working Groups on Market Practice and Regulation

Participation in ICMAs committees, councils and working groups allows members to provide expert
input and direction in its work. They are valued as forums for discussion and reaching a consensus on
topics of common interest.

Legal & Documentation Committee
The Legal & Documentation Committee consists of the heads and senior members of the legal
transaction management teams of member firms active in lead managing syndicated bond issues in
Europe. It is concerned with market practice on documentation, including the ICMA Primary Market
Handbook (IPMA Handbook), and related regulatory issues.

Secondary Market Working Group
The Secondary Market Working Group comprises market practitioners in the secondary debt market. Its
overall focus is to ensure the functioning of this market by regular review of ICMAs rules and market
practice.


Euro Commercial Paper Committee
The Euro Commercial Paper committee comprises the heads and senior members of the ECP teams of
member banks active in this market sector. It is concerned with the functioning of the ECP market,
including maintenance of documentation standards, disclosure, the restructuring and revival of the
asset-backed CP market, and regulatory issues affecting the market.


European Repo Council and Committee
The European Repo Council has been instrumental in developing standard market practice as the repo
market in Europe has developed since the early 1990s. The European Repo Committee (ERC) is the
governing board of the European Repo Council consisting of 19 market practitioners drawn from and
elected by the European Repo Council. The European Repo Council and the ERC meet regularly to
discuss market developments and make representations to the European Central Bank, Euroclear,
Clearstream, and national CSDs.


Asset Management and Investors Council (AMIC)
AMIC represents ICMAs buy-side members and comprises asset managers, treasurers of official
institutions, and representatives of private banks and hedge funds. AMIC is a forum for discussion of
regulatory affairs, market trends and specific market practice issues affecting the buy-side, with working
groups set up at the instigation of members to consider specific products, markets and regulatory
initiatives. The Covered Bond Investor Council is a special interest grouping within AMIC.


ICMA Euro Debt Market AMTE Council
The ICMA AMTE Council, based in Paris, aims to facilitate the development of the depth, liquidity,
transparency and innovative nature of the euro debt markets and to be a centre of expertise for
government and government guaranteed debt. Its members include issuers, intermediaries and
investors.

Council and Committee of Reporting Dealers
Currently, some 30 reporting dealers within the overall membership of ICMA form the Council of
Reporting Dealers. The council comprises the market making community within ICMA and accounts for
the majority of cross-border professional trading. The Committee of Reporting Dealers, comprising nine
individuals drawn from the council members, oversees the actions of the council.


European Financial Markets Federation (EFMF)
The European Financial Markets Federation brings together trade associations across Europe, including
Germany, Italy, Switzerland, the UK and Russia, to discuss regulatory and market practices issues in
common.

Regulatory Policy Committee
The Regulatory Policy Committee oversees all of ICMAs regulatory policy and market practices work. It
consists of the government affairs, regulatory and compliance heads in member firms; the chairs of the
sub-committees forming part of the market practices committee are also invited to its meetings.
Recently the focus of its work has been the regulatory response to the international financial crisis; bond
market transparency; and the future of the OTC market.


Primary Market Practices Committee
The Primary Market Practices Committee consists of the syndication managers of member firms active
in arranging syndicated bond issues in Europe. The committee is concerned with market practice in the
primary market, including the ICMA Primary Market Handbook (IPMA Handbook).



Issuer Forum
The ICMA Issuer Forum aims to gather the main financial institutions who are debt issuers to discuss
areas of marketing practice which are of common interest to them.

Conclusion
Since the last review of developments in International Capital Markets, the mature international
markets have been dominated by four related developments: large capital inflows into dollar fixed-
income markets; the continued appreciation of the dollar; a convergence of interest rates to relatively
low levelsand a compression of yield spreadsincluding in high-yield corporate and emerging
markets; and further advances in the major equity markets. The background against which these
developments occurred was one of a stable macroeconomic environment, characterized by widespread
convergence to low inflation rates, and in some cases price stability, lingering disparities in growth rates,
and continued fiscal consolidation. Intermittent periods of market tensions in currency and bond
markets were associated with uncertainty about the sustainability of the appreciated value of the dollar,
monetary policy, progress toward EMU, and the resolution of financial sector problems in Japan.
Due to International Capital Market countries suffer from different effects which are,
Contagious Effect;
Spillover Effect.



Contagious Effect:-
A contagious effect is a subset category of infectious diseases (or communicable diseases), which are
easily transmitted by physical contact hence when a country suffering with this effect it will affect the
whole world.

Spillover Effect:-
In reference to psychology, the spillover effect is when other people's emotions affect the emotions of
those around them.
For example if one is happy, other people's emotions alter as well. An effect of one person on another is
also referred to as crossover effect. (See also: emotional contagion, partner effects)
In the context of work-life balance, spillover refers to positive or negative effects of an individuals
working life on their personal life or family life and vice versa. Examples are work-family enrichment and
work-family conflict.



BIBLIOGRAPHY
www.google.com
www.wikipedia.com
www.indiatimes.com
www.investopedia.com