The respected Comrade
"We should expand and develop our external economic relations."
We should know well about modern financial market in order to do financial transactions with active enter into it.
Financial market is the market in which the financial transaction is done with foreign countries, financial institutions and individuals throughout the world.
The foundation of financial market is based on the happening and development of international credit transaction.
Credit relationship was developed by the capitalist monetary and commodity relationship and the strength of economy and the development of foreign trade and capital transaction made the credit relation expanded into the world. From this the financial market was established as the place of center of financial institutions trading with fund movement and international settlement.
When the capitalist was the beginning stage of monopoly the first financial market was founded in London. From then until today the financial market had many changes and now it became modern financial market.
We can classify the financial market with several markets according to several criteria.
Firstly, modern financial market is classified with long-term and short-term financial market according to the maturity.
Short-term financial market is one in which financial instruments are traded with maturity less one year.
Many financial instruments such as Treasury bill, banker's acceptance and CD.etc are traded in short-term financial market. Foreign exchange market is also short-term financial market because international credit transaction is combined with foreign exchange in capitalist countries.
Long-term financial market is one in which financial instruments are traded with maturity over one year.
Many financial instruments such as stock, bond and mortgage bond. etc are traded in long-term financial market.
Long-term financial market includes securities market and long-term loan market and securities market includes primary market and secondary market.
Secondly, recent market is classified with money market, foreign exchange market, capital market, gold market and insurance market according to the it's financial instruments.
Money market is a financial market in which short-term financial instruments such as short-term debt instruments are traded.
Today more and more financial instruments are traded rather than other financial markets in money market and traders think that financial instruments with less fluctuated price, high liquidity and safety are trades in this market. So many businesses and financial institutions such as banks use this market in order to get profits with idle funds these days.
Foreign exchange market is a financial market in which foreign currencies are sold and bought according to international settlement.
Today demand and supply of foreign currencies are changed voluntarily and foreign exchange rates are fluctuated according to them and foreign exchange speculations is done actively.
Capital market is a financial market in which companies and governments sell and buy long-term financial instruments such as long-term debt instruments and equities.
Today financial intermediaries such as insurance companies and pension funds which have confidence in their funds as well as banks and stock companies are trading equities and long-term debt instruments in capital market.
Gold market is a financial market in which the precious metals such as gold are traded.
Insurance market is a financial market in which insurance policies are sold and bought throughout the world.
Modern financial market has some characteristics compared with before in many aspects such as participants, instruments and trading method.
Firstly, financial institutions are entering into a lot of different markets because of liberation of businesses and the range of participants is getting wider and wider.
Different from before the range of market is not limited with certain participants and all participants can trade any markets in modern financial market.
Insurance companies are typical example.
Today insurance companies trade not only in insurance market but also in any market such as money market and mortgage market. For example, share of the mortgage market held by insurance companies is over than 2% in the beginning of the 2010s.
Insurance companies are entering into any kinds of financial market and they trade stocks, bonds, mortgage bonds and Eurocurrencies as well as insurance policies.
What participants trade any kind of financial instruments in any financial markets is because of series of crisis.
After 2008~2009 world financial crisis many countries have adopted many solutions, but lots of funds were channeled in financial market because they want even less profit. And this was the main reason why there are no limits of participants of financial markets and they can do everything.
Secondly, debt market is became more active than equities market.
In the past equities market was more active than debt market in many aspects such as trade amount and yield. But in recent years vice versa.
At the end of 2018, the value of debt instruments was $42 trillion and it was about double value of equities. And this illustrates that debt market is getting more active than equities market.
This is because most traders focus on safety not yield now. Most traders consider that debt instruments are more attractive instruments than equities because although equities have fluctuating price and dividends, debt instruments have fixed interest and less fluctuating price.
For these reasons debt market is getting more active than equities market in recent years.
Thirdly, in recent international securities are being traded more in financial market.
Today foreign bonds and stocks are being traded more actively in debt markets and equities markets.
As far as in debt market, the value of foreign bonds including Eurobonds is increasing. Currently over 80% of the new issues of debt market are Eurobonds, and the market for these securities has grown rapidly. As a result, the Eurobond market is now larger than domestic bond market.
Also in money market the transaction of Eurocurrencies has grown and foreign stocks, especially foreign stock index are traded more actively in equities market.
This is because of internationalization of finance.
Lastly, market transaction is become e-transaction more and more.
Today all international financial transactions are being done on line by using internet and this makes international financial market more electronic.
Internet financial market is operated actively and this makes the difference between exchanges and over-the-counter markets less clear. And this tells us that modern financial market is became more electronic.
We should know well about the changes in modern financial market and try to enter into the international financial market actively.
