FINANCIAL MARKET AS THE MECHANISM OF FINANCIAL RESOURCE REDISTRIBUTION
As a result of studying this chapter, the student must:
• the main concepts related to financial markets;
• participants in financial markets and features of their activities;
• signs of the functioning of segments of the financial market;
• methods for regulating financial activities;
• Types of financial centers and their importance in the development of financial markets;
be able to
• classify financial instruments by belonging to a particular segment of the financial market;
• determine the content and effectiveness of operations with financial instruments;
• the conceptual apparatus in the field of financial markets;
• skills in working with financial instruments of various segments of the financial market.
The concept of the financial market
The functioning of the financial system of the state largely depends on the work of the financial market. Financial Market is the basis for ensuring the flow of funds between participants in economic relations through the issuance and circulation of financial instruments. It is a mechanism for redistributing funds of economic entities. It is capital in the process of its movement that brings profit to its owners. Along with this, it is redistributed among various subjects of economic relations. Being one of the most important segments of the market economic system, the financial market provides for movement, redistribution, accumulation of temporarily available funds. In this sphere, there is a direct interaction of such functional economic processes as investment, consumption and accumulation in the course of sales and turnover of financial assets materialized in the form of specific financial instruments.
The financial market is a complex organizational and economic system consisting of separate, closely interconnected links, participating in a single technological cycle (Figure 11.1).
Fig. 11.1. The process of social reproduction
It is built into the structure of social reproduction, where it belongs to the central place, which ensures the movement of money in the form of savings from households to enterprises. Money in the process of movement takes the form of investment for the manufacturing sector. Connecting two markets, factor market and goods and services market - the financial market fulfills both the regulatory function , the parameters of which are set by the state in the form of standards for the circulation of financial instruments.
As can be seen from Fig. 11.1, financial markets are a system-forming mechanism in the circulation of resources and products, whose main economic functions are the transformation of temporarily free cash, i.e. capital, into investments through the organization of the turnover of financial instruments. Providing financing for production factors, the financial market expands the range of investors, and also intensifies the cash flow, ensures the processes of distribution and redistribution of financial resources between industries and enterprises, creates an opportunity for a significant concentration of capital.
Thus, financial markets represent a mechanism for the redistribution of financial resources, which is based on demand and supply on capital, realized through investing in financial instruments. Through financial markets, producers in need of additional resources for infusion into production receive at their disposal the required finances, issuing and selling their own securities. While for capital owners the motivation for determining preferences for capital investment is the rate of profit, and the choice of specific financial instruments is related to an objective assessment of the profitability of certain investment directions.
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