The Roles And Functions Of Financial Markets Finance Essay
Financial market is the market in which funds are transferred from people who have an excess an available funds to people who have a shortage. The securities or financial instruments such as bond and stock are used to in financial market. It is to promoting greater economic efficiency by channeling funds from people who do not have productive use for them to those who do. The financial market can be divided into two types which is money market and capital market. The capital market consist primary market and secondary market. The primary market is financial market in which is for new issues of security are sold by the government and corporation agency. While the secondary market is a financial market in which securities that have been previously issued can be resold. At the secondary market, they make easier and quicker to sell these financial instruments to raise cash.
The function of financial markets is to raise the capital by selling the stock or bond at the capital market. The capital market is the market which longer-term debt and equity instruments are traded. For instance at the Bursa Malaysia, buying and selling occur, securities broker and dealer a crucial at the secondary market. Government or the company will issue bond to borrow to finance their activities or selling stock to the public.
Other than that, at the financial market they provide liquidity for sellers of securities in the secondary market. It is mean easy for the firm to get cash from the buyer when selling asset on short notice without a loss in its value. The cash is important to the firm because payment such as salary to employee, utilities, transport using cash. Example assets with good liquidity at Bursa Malaysia.
Another function of financial market is determining the price of the security that the issuing firm sells in the primary market. Securities pricing is accomplished through the supply-demand forces in a potential market. Behind the supply and demand forces, however, individual investors make decisions about what they feel are the intrinsic values of different financial assets. Where the supply and demand curves meet the market arrives at an equilibrium price.
The financial market also becomes the resources allocation. This is the place where lender issues their bond or stock and borrower will find the correct investment. The government and corporation have to compete with other among them to get investors for available money. The investors who want to earn higher return for a given level risk will evaluate various investments and choose the best investment. That is why financial market important to become intermediaries market for the seller and buyer.
2. Identify four (4) relevant regulators in Malaysia.
In the Malaysia, we have our own regulators to monitor, control, and develop financial activity so that there are no problems in our financial and economic system. If there are problems in our financial market, it is crucial in our economic development and growth. Then, the financial regulator in Malaysia will help government handle the selling and buying of securities and commodities to the seller and buyer at the financial market. There are some regulators in Malaysia:
2.1 Companies Commission of Malaysia (CCM)
The Companies Commission of Malaysia (CCM) was established on 16 April 2002. The CCM is a government agency which is to monitor activities of the activities in Malaysia to sustain positive development. Before person wants to operate the companies even though it sole proprietorship, partnership or companies, they have to register at the Companies Commission of Malaysia (CCM) first. The CCM also will help company disseminate information to the public.
2.2 The Foreign Investment Committee (FIC)
The Foreign Investment Committee (FIC) was formed in 1974. The FIC implements government guidelines to regulate the acquisition of assets or interest, mergers or take-overs of companies and businesses, and is responsible for major foreign investment issues.
2.3 The Securities Commission (SC)
The Securities Commission (SC) was established under Securities Commission Act 1993 and begins operation on March 1, 1993. The SC also acts as Corporate Governance Blueprint on 8 July 2011. This regulator has a wide responsibility to take care of such as securities industry, advising the Minister of Finance and others.
2.4 Bank Negara Malaysia (BNM)
Bank Negara Malaysia (BNM) is a central bank in our country. BNM was established on 29 January 1959 and becomes the adviser and banker to the government. The BNM also have to monitor the financial system and inflation stable in Malaysia. The BNM is an important financial institution to government also to all banks.
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