FUNCTIONS OF FINANCIAL MARKETS
A financial market is a market in which people and entities can trade financial securities, commodities, and other fungible items of value at low transaction costs. The major market participants are broker who is responsible for mediating between a buyer and a seller of products, services, or securities; dealer who smoothes the process of matching the buyer with the seller; investment banks that are involved in the selling of newly issued securities and financial intermediaries acting as mediators between investors and firms when trading securities.
The functions of financial markets include borrowing and lending whereby financial markets provide funds to investors by lending money at an interest rate known as the cost of borrowing. Price determination is also another function in which the market Sets and defines fixed or volatile prices for each type of instrument in the market. The markets also carry out information collection and analysis which involves gathering of important information used by market participants to value or estimate prices of a certain instrument. Risk sharing is also a necessary function in financial markets since they eliminate a type of risk known as systematic risk through investment diversification. The role of liquidity which is the ability to quickly and directly convert securities into cash without value losses during a transaction is also played by financial markets. The markets are also efficient in that they are able to reflect public information on a certain instrument.
Connection between systemic risk and too- big- to- failnd competitive
Systemic risks is the risk of collapse of an entire financial system and hence is directly connected to too- big- to – fail which is the traditional analysis for assessing the risk of required government intervention which can be measured in terms of an institution’s size relative to the national and international market place, market share concentration and competitive barriers to entry or how easily a product can be substituted.
As a member of congress, why would you either support strong Dodd-frank regulation or vote to repeal it?
I would vote to repel Dodd- frank regulation because of the negative impacts it has on the economy. This impacts include the fact that it confides too big to fail by creating an explicit set of too big to fail entities those selected by financial stability oversight council for special regulation by the fed.
The regulation also threatens small businesses as it favors large firms that can afford the lawyers to analyze them. It also hurts retail investors by giving the Securities and Exchange Commission a new set of responsibilities that distracts it from its core mission hence its resources diverted to protect the wealthiest investors. The regulation also threatens to raise the prices for consumers pay and limit the products, services, and providers available to help them achieve their financial objectives.
The regulation also creates a way to a financial crisis since the entities will be too large to manage safely, and would be very deeply connected to the financial markets. It also creates new unaccountable bureaucracies which include data management and stability oversight agencies. There would also be more power for failed regulators despite their past regulatory failures since the regulation gives the securities and exchange commission new regulatory powers.
Dodd-frank allows goverment to sidestep bankruptcy and instead sieze companies through a vague criteria with limited judicial oversight of the process. Wit this reasons I repel the Dodd- Frank regulation.
How close is the analogy between the markets for financial services and health care services?
Hint:develoo model 4 analyzing the 2 marets competitive structure, regulation, size, complexity, efficiency add to this classification scheme as you see fit and answer the model.