Types of markets

1.There are two types of markets according to the character of concluded contracts:

· spot markets

· futures markets.

Spot market: the buying and selling of goods, currency or securities that arc available for immediate delivery.

Futures market: the buying and selling of goods, currency or securities for delivery at a future date for a price fixed in advance.

2. Also, there are three types of markets according to their function:

· commodity markets/exchanges,

· stock markets/exchanges,

· foreign exchange markets.

Сommodity markets/exchanges are the places where raw materials and some manufactured goods are bought and sold for immediate or future delivery. Main terminal markets are situated in London and New-York Terminal markets are the markets dealing mainly in commodities that will be available in the future (futures) rather than goods that are available immediately (actuals). Actuals are the goods that can be purchased or sold on the spot market and used, as opposed to goods traded on futures contracts that are represented by documents. The spot price is usually lower than the futures price, except when there is a temporary shortage. Futures are the goods, currency or securities that will be supplied or exchanged on an agreed future date and for a price fixed in advance. Most terminal markets are outside the countries that produce the goods.

Deals on some commodities like, for example, tea are concluded at the auctions, where dealers are supposed to inspect every lot for sale. But in fact they deal with certified stock. The goods the quality of which may vary from lot to lot (like tea, spices etc.) are sold as is (according to samples). Certified stock is a commodities stock which had been checked and acknowledged proper (good) for delivery under the futures market contracts. The actuals and futures deals are concluded by way of daily callovers (свободная биржевая торговля) where the dealers are represented by commodity brokers, who buy and sell raw materials or manufactured products for a fee in a commodities market. As commodity prices can fluctuate significantly the markets enable the sellers and buyers to hedge, i.e. to buy a commodity at a fixed price for future delivery to protect oneself against loss caused by a possible change in price, in other words, to hedge against rising prices.

Foreign exchange markets are the markets where foreign currencies are traded. Market makers acting on the foreign exchange markets are either dealers, firms hired by commercial banks and acting as princjpals buying and selling currencies for a profit for themselves or foreign-exchange brokers buying and selling for clients and acting as go-betweens therefore. Such markets are not entirely free as free markets where prices are allowed to rise and fall according to supply and demand, without prices being fixed by governments. Such a situation is called 'clean floating'. Though many countries removed all exchange controls, i.e. a set of restrictions imposed by a government on buying and selling foreign currencies (e.g. to control operations which are to be indicated in the balance of payments as capital account using exchange equalisation accounts.) However, the Central Banks of various countries (the Bank of England in the UK, Federal Reserve Bank in the USA), acting on behalf of their governments, influence to some extent the market situations resorting to the Exchange Rate Mechanism, the scheme used by countries in the European Monetary System to keep the relative values of their currencies within agreed limits. The aim of the Exchange Rate Mechanism is to stabilise exchange rate fluctuations. Such currencies are called 'currency snakes' and the rate of exchange is called a managed currency. Foreign exchange deals can be concluded either on spot currency markets with immediate delivery or on forward exchange contracts markets.

Stock markets/exchanges are the markets where stocks and shares are bought and sold under fixed rules, but at prices controlled by supply and demand. The main idea of stock exchanges is to enable public companies, the state and local authorities to attract capital by way of selling securities to investors.

Stock markets are the means through which securities are bought and sold. The origin of stock markets goes back to medieval Italy. During the 17th and 18th centuries Amsterdam was the principal centre for securities trading in the world. The appearance of formal stock markets and professional intermediation resulted from the supply of, demand for and turnover in transferable securities. The 19th century saw a great expansion in issues of transferable securities.

The popularity of transferable instruments as a means of finance continued to grow and at the beginning of the 20th century there was an increasing demand for the facilities provided by stock exchanges, with both new ones appearing around the world and old ones becoming larger, more organized and increasingly sophisticated.

The largest, most active and best organized markets were established in Western Europe and the United States. Despite their common European origins there was no single model which every country copied.

Members of stock exchanges drew up rules to protect their own interests and to facilitate the business to be done by creating an orderly and regulated marketplace.

Investors were interested in a far wider range of securities³ than those issued by local enterprises. Increasingly, these local exchanges were integrated into national markets.

The rapid development of communications allowed stock exchanges to attract orders more easily from all over the country and later the barriers that had preserved the independence and isolation of national exchanges were progressively removed, leading to the creation of a world market for securities. The 1980s saw the growing internationalization of the world securities markets, forcing stock exchanges to compete with each other. Cross-border trading of international equities expanded.

Although many securities were of interest to only a small anal localized group, others came to attract investors throughout the world. Increasingly, arbitrage between different stock exchanges ensured that the same security commanded the same price on whatever market it was traded. London, Paris, New York became dominant stock exchanges.

Stock exchanges emerged as central elements in the financial systems of all advanced countries. Potential investors, insurance companies, pension funds governments and corporate enterprises see securities as a cheap and a convenient means of finance.

Investors need complete and reliable information about stocks and markets. In addition to the listings, the financial pages of newspapers in all countries contain price quotations and share indexes which give a broad indication of how the stock market, or a segment of the stock market, performed during a particular day. So people and organizations wanting to borrow money are brought together with those having surplus funds in the financial markets.

There are a great many different financial markets, each one consisting of many institutions, dealing with different instruments in terms of the instrument maturity and the assets backing it, and serving different types of customers.

II. Marketing Strategies

EXERCISE 1

Дата добавления: 2015-08-03