Professional Documents
Culture Documents
OF THE
FINANCIAL ENVIRONMENT
Eg.Contingency Planning, Saving for future Financial Goals, Corporate Reserves, Investing as per Fund Objective >> CA/SA, FD, CD, CP, Mutual Funds
Eg. Liquidity has to be provided to Investors in Financial products >> Stock Trading, Open Ended Mutual Fund Eg.Payment functions even where available money may be less than required >>Credit Cards, Debit Cards, Loans, Cheque facility, Telegraphic Transfer
Liquidity Function
Payment Function
Eg.Risk is inherent is day to day transactions the same has to be mitigated >> Guarantee, Letter of Credit, Insurance
Eg. FED lays down certain monetary policies like CAR, CRR, SLR, which needs the Financial Environment Support to be implemented.
Policy Function
Eg. Mutual Funds, Insurance, Banks (ABN Amro, Morgan Stanley) Eg Pfizer, Infosys, Microsoft, Google Eg Service Class, Businessman, Farmers Eg Central and State Government, Municipal Corp, Tax Dep't.
Corporations
Individuals
Government
The Funds Flow Equations happens at both Economy and Global Level.
Financial System
Financial Institutions
FInancial Markets
Fianancial Instruments
Financial Services
Regulatory
Primary
Secondary
Debt Instruments
Intermediary Organized
Banking Non- Banking
Risk Management
Wealth Management
Derived Instruments Capital Markets Money Markets Derived Markets Merchant Banking
Systems Instruments Insurance Investement Banking Leasing Hire Purchase
Non- Intermediary
Mutual Funds
Others
Financial System
Financial Institutions
FInancial Markets
Fianancial Instruments
Financial Services
Regulatory Intermediary
Banking
Non - Banking
Financial System
Financial Institutions
FInancial Markets
Fianancial Instruments
Financial Services
Primary
Secondary
Organized
Unorganized
Capital Markets
Money Markets
Derived Markets
Systems
Instruments
Financial System
Financial Institutions
FInancial Markets
Fianancial Instruments
Financial Services
Debt Instruments
Equity Instruments
Financial System
Financial Institutions
FInancial Markets
Financial Services
Fianancial Instruments
Credit Rating
Wealth Management
Merchant Banking
Mutual Funds
Insurance
Leasing
Hire Purchase
Financial System
Financial Institutions
FInancial Markets
Fianancial Instruments
Financial Services
Regulatory Intermediary
Banking
Non - Banking
SAMA Saudi Arabian Monetary Agency (Central Bank handles both the Banking and Financial Markets)
REGULATORY FI AN EXAMPLE
Eg. Current Account, Savings Account, NRE Account Related products and services :ATM, Debit Card, Phone Banking, Internet Banking, Extended Banking, Any branch Banking, Door step Banking, Investment Advisory Services, Priority Banking Credit Card, Housing , Car, Consumer, Personal Loans, Credit Line
Wholesale Banking
Mutual Funds
Insurance Companies
NBFC
World Bank
Gives soft loans grants to projects in developing nations.
OTHERS
Custodial and Depository Services Providers (E.g.. SHCIL Stock Holding Corporation of India Ltd, NSDL, CDSL) Credit Rating Agencies (E.g. Moodys CRISIL, ICRA, CARE) Investment Banks - including Merchant Banks (E.g. Merrill Lynch, Goldman Sacs, UBS Warburg, Karvy Consultants) Leasing and Hire Purchase Companies (E.g.IL &FS, Hertz ,Wheelz)
Financial System
Financial Institutions
FInancial Markets
Fianancial Instruments
Financial Services
Primary
Secondary
Unorganized
Organized
Capital Markets
Money Markets
Derived Markets
Systems
Instruments
Financial products are created in this market Existing financial products are traded in this Market
Secondary Market
PRIMARY MARKETS
Primary markets are where Corporations or government entities raise money. It is where investors buy the securities the first time. The buyers are investors, the money they put up goes to the issuer of the security. Initial Public Offerings are made on the primary market. So are secondary offerings and seasoned offerings (additional shares). The unique role of the lead investment banker is to determine the type of security to be offered, organize the offering, and set the offering price.
SECONDARY MARKETS
Once an offering is sold to an investor, the same investor may unload the security (usually stock) on the secondary market. This is where the security trades a second time.(Eg.NYSE, NASDAQ, NSE, BSE) Markets work under the Auction and/or Dealer Environment.
Auction Environment :Buyers and sellers can trade directly with one another - buyer and seller are brought together by a broker/specialist - who receives a commission. Dealer Environment The Market Maker is obliged to provide some form of price continuity for the shares. They gain from the bid-ask spread on each trade.
Unorganized Market
Pawn Broker Sahukar Money Lender
products dealt are of short-term maturity (less than a year) products dealt are of long-term maturity (> a year)
these products dealt derive their value from the Money Market and Capital Market based Financial products
where the products dealt represent debt and are generally of short to medium term maturity Where the products dealt represent the owners funds it is always of long-term maturity
Financial System
Financial Institutions
FInancial Markets
Fianancial Instruments
Financial Services
Debt Instruments
Equity Instruments
FINANCIAL PRODUCTS
Debt products
Equity products
Shares/ Stocks
Ordinary/ Common Preference Convertible Preference
Hybrid products
Bonds Corp/Govt/ Muncipal Debentures Corporate bonds. Fixed Deposit/Cert of Deposit Commercial Paper CP Treasury Bill T-Bill Govt. Securities G-Sec Repo, Term Repo, Rev Repo FCCBs
FORWARDS, FUTURES, OPTIONS AND SWAPS ARE DERIVATIVES SINCE THEY ARE SETTLED IN THE FUTURE.
Swaps Currency Swap Interest Rate Swaps Credit Default Swaps Swaptions Forward Rate Agreements Exotic options
MUTUAL FUNDS:
Equity focused MF
Debt focused MF
Financial Environment
Market Supporting Environments Custodial & : DepositoryCredit Rating Trading, Broking, Services Clearing, Settlement Risk Management Wealth ManagementMerchant Banking
Insurance
Market Facilitation
Regulatory Environment provided by the market regulator Trading Environment, Price Determination Mechanism provided by the Stock Exchange Clearing and Settlement Environment provided by the Stock Exchange Brokerage Environment (Terminal / Web based) Dealer Environment provided by Dealers Custodial Environment provided by Service providers Depository Environment - provided by the Depository and Depository Participants Stock Lending provided by authorized stock lenders
FINANCIAL SERVICES
Credit Rating Environment Risk Management Wealth Management Mutual Funds and Hedge Funds Factoring and Forfaiting Research and Analysis Departments
Lead Management, Underwriting Private Placement Book Building Registry and STA Environment Foreign Currency Issue Management
Foreign Currency Convertible Bonds (FCCBs) Global Depository Receipts (GDRs) American Depository Receipts (ADRs)
Financing Strategies Corporate Restructuring Venture Capital Merger and Acquisition Management
The process of involving numerous different lenders in providing various portions of a loan.
Insurance Services (Life, Non Life) Leasing (Operating Lease, Financial Lease) Hire Purchase Venture/Angel Funding and Private Equity Funding
(Example ICICI direct, Sherkhan.com, Motilal Oswal, Dealers on OTCEI) (Example Om Kotak Mahindra, Kothari Pioneer)
(Example Bajaj Capital, SHCIL, Way2Wealth) (Example Direct Sales Agent for sales of Credit Cards, Home Loans, Bank Accounts) (Example Factoring, Forfeiting)
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