O C C U PAT I O N A L C E R T I F I C AT E :

FINANCIAL MARKETS PRACTITIONER

MODULE 1
INTRODUCTION TO FINANCIAL MARKETS
LOCAL FINANCIAL MARKETS

1
WHAT IS A
FINANCIAL
SYSTEM?

2
 COMPONENTS OF A FINANCIAL
SYSTEM

A financial system is a system that brings together Financial Participants,

Markets, Products and Services.

• Participants
• Markets
• Products
• Services

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The primary goal of a financial system is accelerated growth of
an economy.

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 ROLE OF THE FINANCIAL SYSTEM

• It plays an important role in the • This is achieved by financial

growth of the economy by
Influencing economic performance
and economic welfare.
infrastructure, in which entities
with funds allocate those funds to
those who have potentially more
productive ways to invest those
funds.

Predominantly channels funds between lenders and borrowers, which

encourages the movement of funds in an economy.

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 FINANCIAL MARKETS
INFRASTUCTURE

Financial market infrastructure that is resilient and effective has many benefits:
• Enhances the stability of the financial system.
• Reduces transaction costs in the economy
• Promotes the efficient use of financial resources
• Improves financial market liquidity and facilitates the conduct of monetary policy

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 PARTICIPANTS IN THE FINANCIAL
SYSTEM

The principal participants in the financial system are:

• Lenders
• Borrowers
• Financial Intermediaries (e.g. Banks)

Non-principal participant’s include:

• Financial Exchanges
• Broker –dealers
• Fund Managers
• Regulators
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FUNCTIONS OF A FINANCIAL
SYSTEM

Facilitate the flow of funds in order to finance

investments by corporations, governments and
individuals.

Play the role of intermediaries and thus determine the

flow of funds.

Monitor and regulate the participants in the financial

system.

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FINANCIAL SYSTEM SYMPLIFIED

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 The financial system of an economy consists
of five main components.
1. Financial Market
2. Financial Instruments
3. Financial Participants
4. Financial Regulator
5. Financial Services

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 FINANCIAL MARKETS

CAPITAL MONEY FX MARKET DERIVATIVES

MARKET MARKET MARKET

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FINANCIAL INSTRUMENTS

Stocks Bonds Commodities Derivatives

Unit trusts EFTs

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 FINANCIAL PARTICIPANTS

• Investment banks
• Retail/Corporate banks
• Government
• Stock Exchanges
• Retail investors
• Insurance and Pension Co’s
• Clearing Houses
• Brokers/Dealers
• Custodians

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 FINANCIAL REGULATORS

Example . FNB is regulated by various entities, such as the

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FINANCIAL SERVICES

Mergers &
Research & Advice Underwriting
Acquisitions

Asset
Sales & Trading Market making
Management

Specialised
Financial Solutions

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SERVICES PROVIDED BY THE
INVESTMENT INDUSTRY

Financial Investment Investment Trading

Planning Management Information services

Custodial
services

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PARTICIPANTS IN THE INVESTMENT INDUSTRY

Clearing and
Investment
Custodians settlement
banks
agents

Institutional
Analysts Dealers
investors

Individual
Auditors Brokers
investor
 BENEFITS OF THE INVESTMENT
INDUSTRY
The investment industry facilitates movements of funds between savers and investors. This
reduces the search costs between savers and investors trying to find each other

Benefits to the Economy Benefits to the Individual

- Efficient allocation of capital - Offers investment products

- Provide information about - Provides information about
available investments investments
- Creating securities - Provide liquidity
- Providing liquidity - the market - Keeps transaction costs low
for an asset is liquid if investors - Transfers risk
can buy and sell the asset quickly
without changing its market price

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FORCES AFFECTING THE
INVESTMENT INDUSTRY

Competition Globalisation

Fintech and
Regulation digital
disruption

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