Financial Markets vol. 3

This book is written for market professionals and students who seek knowledge concerning financial markets. We focus on all four types of financial products: equities (stocks and warrants), debt instruments (bond and money market instruments), foreign exchange, and derivatives. We believe that in today's financial environment everyone must have a basic understanding of each of these markets. More and more individual investors are managing their own retirement portfolios. Both individuals and institutions are investing across borders so that it is not wise to only consider foreign exchange in international finance books and courses. Volume 1 comprises five chapters. Chapter 1 describes the ways that equities and debt are created, including initial public offerings, private placements, and auctions. All financial assets have certain characteristics in common. All four product types are traded in markets, and, fortunately, the ways in which they are traded are limited. Chapter 2 describes the various trading venues such as exchanges and alternative trading systems and how trading is conducted such as in batch or call sessions and in continuous markets. Chapter 3 explains the various types of transactions costs associated with trading financial assets. We cover both explicit transactions costs such as commissions and implicit transactions costs such as the cost resulting from needing to execute an order quickly. Chapter 4 discusses a topic that is frequently overlooked-clearing and settlement. Clearing and settlement involve the exchange of the financial assets and funds that result from trading. Historically, this topic has not been considered important for domestic investors. But as investors invest globally they encounter a wider variety of clearing and settlement practices. Also, the risks involved in clearing and settlement are greater in some markets than in others. Hence, the authors believe that understanding of this topic is essential for today's finance professionals and individual investors. Chapter 5 deals with the regulation of financial markets. The particular institutions that regulate each market vary from country to country. But countries are increasingly coordinating their regulation of financial markets. During the crisis of 2008 governments worldwide cooperated in instituting bans of short selling. And efforts to combat money laundering and other financial crimes now have a worldwide scope.