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What are the constituents of financial service market?

by Team Goseeko

Constituents of financial service market mainly consist of money market and capital market. Thus, it provides the free flow of capital and liquidity in the marketplace. Accordingly, such constituents of financial service market are classified on the basis of nature of transactions-

a) Money market

It refers to the short term financial market that facilitates trading of near money assets for short period. Further, the classification of this market-

i) Organisational structure

  1. Bill market: Firstly, in this market for purchase and sale of different trade bills .

2. Acceptance houses: Secondly, under this market, trade bills accepts trade bills for purchase and sale.

3. Discount houses: Thirdly, these are the financial institutions which facilitates discounting of commercial bills and trade bills.

4. Dealers and brokers: Finally, it deals with trade bills to facilitate acceptance and discount of bills.

ii) Institutional structure

1)Central bank: The role of central bank are-

-firstly, it regulates of money market.

-secondly, the central bank provides refinancing facilities to other institutions engaged in money market.

-finally, RBI purchase and sale of treasury bills etc.

2. Commercial banks: Further, it deals with commercial papers, certificate of deposits, treasury bills etc. in the money market.

3. Non-banking financial institutions: Additionally, it facilitates purchase and sale of money market instruments.

4. Dealers and brokers: Further, it performs activities to bring together the buyers and sellers of money market.

b) Capital market

It refers to the market that facilitates trading of financial assets for long period . Securities and Exchange Board of India regulates the market. The classification of this market are-

  1. Primary market or new issue market: Firstly, it is the capital market for purchase and sale of fresh securities .

2. Secondary market or stock exchange: Secondly, it is the capital market for trading second hand securities.

3. Gilt edge market: Finally, this market facilitates trading of Government and Semi- Government securities.

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