Section 3 Financial Market System
1. Financial markets and their classifications
a) Definition of financial markets
Unlike the product market, the financial market is a type of factor market. The financial market is the market for creating and trading financial assets, and it is the sum of the supply and demand relationship and trading mechanism formed by taking financial assets as the trading object.
Financial markets have five main functions:
The first is financial integration, in which the financial market realizes the transfer of monetary funds between suppliers and demanders through the transaction of financial assets, and promotes capital formation
The second is to find that the financial market determines the trading assets through financial asset transactions, and guides funds to allocate between different financial assets
The third is to provide liquidity, and the financial market provides investors with a place and mechanism for financial assets
Fourth, risk management, on the one hand, the real economic sector or investors can manage, prevent and resolve the risks implied in economic activities through insurance, hedging transactions, etc., on the other hand, the financial market also has the function of reconfiguring the risks generated by tangible assets between the supply and demand of funds;
Fifth, reduce the cost of search and information, in an efficient market, ** reflects the sum of the information that can be collected by all market participants.
ii) Classification of financial markets
According to the term division, the short-term financial market with a maturity of less than one year and the medium-term financial instruments as the medium is called the money market, and the long-term financial market with the long-term financial instruments as the medium and the maturity of more than one year is called the capital market.
According to the division of trading instruments, it is divided into the bond market, which deals in debt instruments;The equity market in which equity instruments are traded is also known as the ** market. The market in which debt instruments and preferred shares are traded are collectively referred to as fixed income markets, and markets that do not include preferred shares are referred to as ordinary markets.
According to the time of entry into the market, the market in which financial assets are issued is called the primary market;The market in which financial assets are traded between investors is known as the secondary market.
Depending on the trading method, the financial market can be divided into the on-exchange market and the over-the-counter market.
According to the trading object, the financial market can also be divided into the main board market (the market for large mature companies) and the second board market (the market for small and medium-sized companies).
Second, China's financial market system
a) Money market
The money market is a typical market dominated by institutional investors, and the main purpose of its activities is to maintain the liquidity of funds.
The money market mainly includes the interbank lending market, the repurchase market, the bill market, and the large-denomination negotiable certificate of deposit market.
Note: **The market belongs to the capital market, not the money market. （t）
The interbank lending market refers to the market in which financial institutions conduct short-term financing in the form of currency lending. Interbank lending funds are mainly used to make up for the short-term shortage of bank funds, the difference in bill settlement and to solve the temporary shortage of funds.
In China, interbank lending refers to unsecured financing between financial institutions approved by the People's Bank of China to enter the national interbank lending market through a unified national interbank lending network. The People's Bank of China (t) supervises and administers the interbank lending market in accordance with the law. Financial institutions must be approved by the People's Bank of China to enter the interbank lending market, and their interbank lending transactions are subject to the supervision and inspection of the People's Bank of China.
2) Capital markets
The capital market has two main functions:
The first is the financing function, which allows companies to obtain funds from the capital market through IPOs (initial public offerings), capital increase issuances, allotment of shares, issuance of preferred shares or convertible bonds
The second is the first discovery function, through investors trading in the secondary market, so that the financial market can accurately reflect the market supply and demand relationship and the risk level of financial assets, so as to guide the optimal allocation of resources.
1.**Market.
It is a certificate issued by a joint-stock company to the investor publicly or privately when raising capital, which is used to prove the identity and rights of the investor's share capital, and to enjoy the rights and obligations according to the number of shares held by the holder.
*There are two main types of issuance systems: one is the registration system, and the other is the approval system. The registration system is a more market-oriented issuance system than the approval system.
Internationally, the registration system is widely implemented in mature markets, but there is no unified model.
China's "** Law" stipulates that the public issuance of ** must meet the conditions stipulated by laws and administrative regulations, and be reported to the first supervision and management agency or the first authorized department for registration in accordance with the law.
*There are two types of issuance: initial public offering ("IPO") and capital increase issuance of listed companies. The "* Law" stipulates that the company's public issuance of new shares shall have a sound and well-run organizational structure, have the ability to continue operations, the financial and accounting reports of the last three years have been issued with unqualified audit reports, and the issuer and its controlling shareholders and actual controllers have not committed criminal offenses of bribery, embezzlement of property, misappropriation of property or undermining the order of the socialist market economy in the past three years.
China's ** issuance mainly adopts the method of public offering and listing, and at the same time, listed companies are also allowed to issue non-public to specific objects under the conditions of complying with relevant regulations. In any of the following circumstances, it is a public offering: Issuance to an unspecified object**;The number of employees who have issued ** to specific targets with a cumulative total of more than 200 people, but who have implemented the employee stock ownership plan in accordance with the law is not counted;Other issuance acts stipulated by laws and administrative regulations.
2.Bond market.
Bond is a kind of valuable debt, which is issued by various economic entities in society to bond investors in order to raise funds, promising to pay interest at a certain interest rate on a regular basis and repay the principal at maturity.
Bonds generally have four characteristics (t):
The first is repayment, which means that the bond has a specified repayment period, and the debtor must pay interest and repay the principal to the creditor on time
The second is liquidity, which means that creditors can flexibly transfer bonds according to their needs and actual market conditions, so as to recover the principal in advance and realize investment returns;
The third is security, which means that the income of bondholders is relatively stable, does not change with the change of the issuer's operating income, and can recover the principal on schedule
The fourth is profitability, which means that bonds can bring a certain amount of income to holders, that is, the return of bond investment.
There are many types of bonds, and there are different classifications according to different criteria. According to the different issuers (T), bonds can be divided into ** bonds, financial bonds and corporate bonds.
At present, China has formed a diversified and hierarchical bond market system dominated by the inter-bank bond market, including the exchange market and the counter market of commercial banks.
In recent years, the types of bonds issued by China's bond market mainly include ** bonds, financial bonds and corporate credit bonds.
* Bonds include national bonds and local ** bonds, local ** bonds are divided into general bonds and special bonds, the issuance of general bonds is mainly for the construction of pure public welfare projects to raise funds, the issuance of special bonds is mainly for the construction of public welfare projects with a certain income.
Financial bonds include CDB financial bonds, policy financial bonds, general commercial bank bonds, subordinated commercial bank bonds, commercial bank capital mixed bonds, ** corporate bonds, interbank certificates of deposit, etc.
Corporate credit bonds include debt financing instruments of non-financial enterprises, corporate bonds, corporate bonds, convertible bonds, separable bonds, private placement bonds of small and medium-sized enterprises, and exchange-backed assets** issued by non-financial enterprises.
3) Foreign exchange market
The foreign exchange market is a trading place where foreign exchange is bought and sold.
The foreign exchange market in the narrow sense refers to the foreign exchange transactions between banks, including foreign exchange transactions between banks in the same market, foreign exchange transactions between banks in different markets, foreign exchange transactions between ** banks and foreign exchange banks, and foreign exchange transactions between ** banks in various countries;
The foreign exchange market in a broad sense refers to the sum of foreign exchange trading and business activities composed of ** banks, foreign exchange banks, foreign exchange brokers and customers in various countries.
At present, China's domestic foreign exchange market is divided into interbank foreign exchange market and bank counter foreign exchange market according to the different trading subjects.
4) ** market
*Both financial and commodity attributes. At present, China has gradually formed a multi-level and full-featured market system with the centralized and unified primary market of the Shanghai Stock Exchange as the core, the competitive and orderly secondary market as the main body, and the diversified derivatives market as the support.
5) ** Market
The market is the market for buying and selling. Contract, also known as contract, refers to a standardized contract formulated by the exchange and stipulates the delivery of a certain amount of physical commodities or financial commodities at a specific time and place in the future.
1.Basic characteristics of trading
1) Contract standardization. Contract standardization means that all the terms of the contract are pre-specified by the exchange except for the contract and have the characteristics of standardization.
2) Transaction centralization. Transactions must be made within the exchange. **The exchange implements a membership system, and only members can enter the market.
3) Two-way trading and hedging mechanism. Two-way trading, that is, a trader can either use a contract as the beginning of a transaction (called opening a position) or sell a contract as the beginning of a transaction (called selling to open a position), which is commonly referred to as "buying short and selling short". Linked to the characteristics of two-way trading is the hedging mechanism, in which the trader can be relieved of the performance obligation by trading in the opposite direction of the trade at the time of opening the position.
4) Leverage mechanism. **The transaction implements a margin system, and the trader needs to pay a small amount of margin, generally 5%-10% of the contract value, to complete the contract transaction. **Trading has the characteristic of investing a large amount of value with a small amount of money, which is vividly called "leverage mechanism".
5) Daily debt-free settlement system. At the end of each trading day, the trader's profit and loss of the day is settled, if the trader has serious losses and the margin account is insufficient, the trader is required to add margin before the market opens on the next day, so as to achieve "no debt every day".
2.The best exchange in our country
There are four ** exchanges in China: Shanghai ** Exchange, Dalian Commodity Exchange, Zhengzhou Commodity Exchange and China Financial ** Exchange.