Global Financial Market. Gautam Goswami Fordham University. Private Financial Intermediaries (FIs). Private FIs: profit-seeking firms whose assets are predominantly financial.
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FI that brings together buyers and sellers without acting as a principle in the transaction.
FI that makes a market in a financial security, thereby participating as a principal in the financial transaction.
Dealers that make a market in one or more number of securities and who maintain a “fair and orderly” market by dealing personally in the market.
2. Over-the-counter (OTC) Markets
NYSE: New York Stock Exchange
CBOT: Chicago Board of Trade
CME: Chicago Mercantile Exchange
LIFFE: London International Financial Futures Exchange
LSE: London Stock Exchange
NASDAQ: National Association of Securities Trader Automated Quotation
FX Market: Foreign Exchange Inter-bank Market
Example 1: Trade in German Govt. Bond futures moved from LIFFE derivatives market to Swiss- German derivatives exchange EUREX
Example 2: Flight from BBB to AA bonds in 1998 after Russian Default
National Association of Security Dealers (NASC)
National Futures Association (NFA)
Bond Markets Association ( BMA)
Type of PFI
1. Buy-side companies:
Professional Asset Management Companies (invest client’s money): Blackrock, PIMCO, BGI, Deutsche Asset Mgmt
Mutual Fund Co.
2. Flagship Sell-side companies are:
3. Mutual Fund or Asset management companies.
Commercial Bank and Investment Bank
Money is made in Private Financial Intermediaries
USA Europe Asia Australia
New York London Tokyo Sydney
Chicago Paris Singapore
Frankfort Hong Kong
+California Amsterdam Shanghai
Bringing new securities to market
Advising on Mergers & Acquisitions
Maintain accounts for individual investments
- settling trades
1. Understand the existing Pricing Model
2. Develop programs that traders could run on their computers
1. Portfolio Managers data mining task
2. Hedge Funds Use models and take risks
(smaller operations) typically hires – quant traders
Positions of hiring:
Exchanges Secondary Markets
Legal / Compliance
Revenue / Producing
Retail / Prime Brokarage
Int. Rate Derivatives
Firms Government Agencies Other FIs
Size of Different Global Financial Markets
(Source: RPM Handbook)
Notes: EUREX was formed joining DTB and SOFEX Euornext is a combination of Dutch and Paris exchanges
DTB: Deutsche TerminBorse
SOFEX: Swiss Options and Financial Futures Exchanges
Figure 2.1 DerivativesPrivate Financial Intermediaries (FIs)