TRADING

IN
FIANANCIAL
SECURITIES
 FINANCIAL SYSTEM
ECONOMY

SAVERS BORROWERS

CURRENT INCOME CURRENT INCOME

> CURRENT EXPENSES < CURRENT EXPENSES

SURPLUS UNITS DEFICIT UNITS

TRANSFER
FINANCIAL
OF FUNDSSYSTEM
 Financial System -
introduction
It plays a vital role in the economic growth of
a country.
It intermediates between the flow of funds
belonging to those who save a part of their
income and those who invest in productive
assets.
It facilitates mobilization & allocation scarce
resources of a country.

 Formal and Informal
Financial System


 FORMAL FINANCIAL SECTOR:

 It is characterized by the presence of an
organized, institutional and regulated system
which caters to the financial needs of the
modern spheres of economy.


 INFORMAL FINANCIAL SECTOR:

 It is an unorganized, non-institutional, and non-
regulated system dealing with the traditional
and rural spheres of the economy.
 MEANING OF A FINANCIAL
SYSTEM
A financial system is a complex, well-
integrated set of sub-systems of financial
institutions, markets, instruments, and
services which facilitates the transfer and
allocation of funds, efficiently and effectively.

 FINANCIAL SYSTEM – ITS COMPONENTS

FINANCIAL FINANCIAL MARKETS

INSTITUTIONS

FINANCIAL FINANCIAL SERVICES

INSTRUMRNTS
FINANCIAL INSTITUTIONS
These are intermediaries that mobilize savings
and facilitate the allocation of funds .


Classification:


 Banking and Non-Banking Financial Institutions

 Term-Finance Institutions
 Such as IDBI, IFCI, SIDBI

 Specialized and Sectoral Finance Institutions

 Like EXIM, IDFC, NABARD, NHB

 Investment Institutions
 MFs, and Insurance Companies.

 State-Level Financial Institutions

 Such as SFCs, SIDCs.
 FINANCIAL INSTRUMENTS
(SECURITIES)
 A financial instrument is a claim against a person or an
institution for payment, at a future date, of a sum of
money and/or a periodic payment in the form of
interest or dividend.
 equity or debt instruments or interest payments or
dividends
 They represent joint stock( equity /preference – listed or non
listed) ; debentures / bonds issued by legal entities and
Government/quasi government notes/ bonds
 Interest payments & dividends
Financial Securities Type:
 Primary
 Secondary
Distinct Features:

 Marketable
 Tradable
 FINANCIAL MARKETS
Market provides a mechanism for the
Exchange based or OTC based trading for
financial products under a policy framework.
 SEBI/RBI/NSE/BSE
The participants in the financial markets are
Borrowers (issuers of securities),
Lenders (buyers of securities) and
Financial intermediaries.
 Prim a ry
& Secondary Primary
& Secondary
 FINANCIAL MARKETS
TYPES
Money market – a market for short-term debt
(< 1 year) instruments.
Capital market – a market for long-term equity
and debt instruments.
Foreign Exchange Market – a market for the
exchange of foreign currencies.

 CAPITAL MARKET
SEGMENTS

Primary Market– a market for new issues or it


creates long-term instruments for borrowings.



 Methods of Floating New Issues

 Public Issue

 Right Issue

 Private Placement


CAPITAL MARKET SEGMENTS
Secondary Market – a market for trading


outstanding issues.
It provides liquidity through the marketability
of these instruments.
The secondary market is operated through
Stock markets or OTC through broking
community
 Concept primary dealers
 Meaning of Financial Services

Financial services are services that ensure the

smooth flow of financial activities in the
economy.


The ‘Financial Service’ can be provided through

‘financial intermediation’.
 Financial intermediation is a process by which funds
are mobilized from a large number of savers and
make them available to all those who are in need
of it and particularly to corporate customers.
Types of Financial Services
Regulatory Environment
In India, the Ministry of Finance, the RBI, the
Securities and Exchange Board of India, etc
are the major regulatory bodies exercising
regulatory control and supervision over the
functioning of the financial system in the
country.