World finance market: definition, participants, analysis, structure and activities

Since people invented money, a global financial market has been emerging in which currencies and securities circulate. The importance of this market for the economy cannot be overestimated, it is the movement of money that is the main driver of development of the countries of the world.

The concept of the global financial market

Money in the social structure performs a wide variety of functions, they allow you to make the purchase of goods and services and at the same time they themselves are a specific product. The international finance market is a complex system that provides cash flow between different economies, companies and people. Money in various forms is the subject of transactions in this particular market. They become a source of profit.

The formation of the global finance market

Despite a long history of money, world market in the modern sense, appears only in the middle of the 20th century. The global financial market has united national markets, the functions of such international organizations as the International Monetary Fund, the World Bank, and large private banks have begun to expand.

The following factors influenced the integration of national markets into a single financial space:

• active growth in the use of digital technologies in the field of finance, various electronic tools lead to the integration of financial systems, a single payment system appears, which brought together local markets;
• increase in volumes of operations in national and international markets, expansion of types of securities;
• the emergence of new ways of mobilizing capital;
• the processes of universalization and diversification of the activities of banks and large corporations;
• privatization processes that increase the potential supply of securities in the market;
• strengthening the role of financial markets in the redistribution of financial resources in the global and national markets;
• liberalization and institutionalization of markets, the number of financial institutions is growing, and they are subject to new laws that realize greater economic freedom of market participants.

Thus, the global finance market is being formed as a mechanism for regulating cash flows. It creates continuous conditions for the growth and development of production, stimulates the activity of market players.

The financial market of Russia is also included in this integration process, although several reasons impede its development:

• lack of resources; Russia is experiencing a liquidity crisis and low growth in capital investment in real sectors of the economy;
• passivity of the population as a participant in the financial market, low financial literacy fear of risks and distrust of financial institutions hamper the development of the investor market;
• a high degree of risk, especially in times of crisis.

Functions of the financial market

The global function that the financial market performs is the redistribution of free capital between countries in order to stimulate the development of the global economy.

In addition, the financial market performs the following functions:

1. The accumulation of money. The market provides various opportunities for investing savings, which leads to increased production and market growth.
2. Price regulation. The market performs the function of pricing resources on an international scale, thereby contributing to a balance between the seller’s offer and investor opportunities.
3. Bringing financial assets to the end consumer.The market creates numerous institutions for the sale of assets: exchanges, brokerage houses, banks, etc., which allow depositors and buyers to gain access to funds.
4. Regulation of international financial flows. The market stimulates the development and growth of national markets, ensuring the free movement of money between them. The global market provides new opportunities for local markets in terms of investments and other financial instruments.

Financial market structure

Money in the market takes many different forms, so the idea of ​​its structure can be very different. There are several approaches to determining its structure. Firstly, it is customary to single out a common international market and smaller national ones. The global market does not have a single legislative body and management. While national markets are managed by national governments, they exist on the basis of their own currencies, and also build certain relationships with world reserve currencies. Therefore, the differences between global and national financial markets are quite large. Residents of countries may conduct operations in national currency, as well as in monetary units of other countries.

In addition, it is customary to classify the financial market according to functional grounds, in which case such structural segments of the market as currency, stock, investment, insurance and credit are distinguished.

There is also an approach that highlights two large parts in financial market: capital market and money. In turn, the capital market is divided into stock and credit, and the money - into interbank and accounting.

Financial market participants

The complexity of the sphere of finance lies in the fact that there are entities of different levels. Participants in the financial market are divided into two parts: entities on the supply side and entities on the demand side. Usually all participants can speak on both sides.

The basic participants of the financial market are:

• professional subjects;
• individuals
• enterprises;
• government.

The greatest variety is presented in the category of financial intermediaries (professional entities). This group includes:

• institutions serving market needs;
• international organizations, such as the IMF, which have special rights and obligations;
• investment companies and funds;
• trust funds;
• national and private banks;
• pension and insurance funds.

There are also many other classifications of market participants:

• by the nature of participation in operations - direct and indirect, indirect;
• for the purposes and motives of the participants - speculators, hedgers, traders and arbitrageurs;
• by type of issuer - national, regional and municipal governments, corporations, banks.

Finance Market Tools

Money transactions require different approaches, in connection with which various financial market instruments appear, and this process continues. Today, the following can be distinguished among them:

• money and settlement documents;
• stocks;
• bills;
• Checks
• bonds;
• debt receipts;
• credit cards
• certificates
• insurance policies;
• mortgages.

It is customary to classify instruments by term of validity for short-term (up to 1 year) and long-term (over 1 year). Guaranteed income - for fixed income and uncertain income instruments.

World stock market

This segment of the global financial market is associated with securities transactions. The stock market is a mechanism that provides a link between buyers and sellers of securities - stocks, bonds, etc. It has a specific legislative framework, the activity of financial markets is regulated by international and national law.The peculiarities of this market are that the goods in the form of securities do not deal with material values, but interact with such segments as the capital market, manufactured products, and money. But all these values ​​are presented in the form of special tools: bills of lading, futures and options bills, mortgage bonds, stocks, bonds. The main function of the stock market is the redistribution of cash accumulations in the most promising and profitable sectors.

Foreign exchange market

Trading in national currencies is carried out in the foreign exchange market. Its specificity lies in the fact that money is sold here for other transactions. Typically, the analysis of financial markets is based on indicators of this segment. Currency transactions are made on special exchanges, the most famous of which are London, Tokyo and New York. The structure of the foreign exchange market includes international, national and regional markets. The functions of the currency segment are the establishment of national currencies, the provision of exchange transactions, the management of credit and currency risks. The foreign exchange market also has a speculative function, which is based on the difference in exchange rates.

World Investment Market

The current development of the financial market largely depends on attracting finance from different areas of production. Therefore, there is an investment market, which ensures the completion of transactions on the sale of investment goods and securities. A variety of investment opportunities makes this market complex and specific. Functions of the investment market: mobilization of capital, search for investment-attractive sectors and spheres, distribution of capital, activation of production and economic processes.

World Insurance Market

A special part of the global market is the insurance segment. The insurance market is the area of ​​operations for the sale of insurance products: policies, certificates, etc. Any financial market, banks, population needs insurance. This market performs such functions as compensation, distribution, accumulation, investment, and preventive. All of them are sold in different segments of the insurance market, which consists of:

• insurance organizations, insurance products;
• policyholders;
• intermediaries;
• appraisers;
• state regulation of the insurance market.

Traditionally, the insurance market is divided into international, regional and national. Each segment has its own legislative base, but today there is a clear trend towards globalization and enlargement of this market.