Financial Market

Financial Intermediaries

Firms that hold the accumulated funds of individuals or firms as deposits, and then make loans to other firms or individuals who can make use of them

Primary financial markets

facilitate securities that can be sold into the economy

Secondary financial markets

transactions with financial assets that have already been issued on a primary market some time in the past

Securities

Any form of financial instrument that provides the holder of that instrument with a claim over real assets or a future income stream

Australian Securities Exchange (ASX)

the major share market in Australia where the purchase and sale of most shares in public companies occur

Credit

the loans extended to individuals, businesses and governments for spending on consumption and investment

Bonds

a written record of debt

public company

an entity whose shares are traded freely on the share market and not subjected to any restrictions on being transferred to other parties

share

type of financial asset that provides an individual with ownership over part of a business or company

private company

restricts ownership of shares to only a few individuals and places restrictions on share transfers so that ownership cannot be freely bought or sold between individuals

Dividends

the profit returns received by the shareholders of a business

capital gains

the profits made by investors who sell their shares or assets at a price above the level that they originally paid for them

float

company lists itself on the stock exchange and offers its shares to the general public for the first time

speculation

investors buy assets with the intention of reselling them for a higher price within a short period

Foreign exchange markets

enables the movement of funds around the world

Global debt markets

important for Australia’s economic development of its reliance on foreign borrowing

Council of Financial Regulators (CFR)

coordinating body for financial market regulation that provides for cooperation and collaborating among its four members (RBA/APRA/ASIC/Treasury)

Reserve Bank of Australia (RBA)

Australia’s central bank where it conducts monetary policy and oversee the stability of the financial system

Australian Prudential Regulation Authority (APRA)

the government body established to regulate all deposit taking institutions, life and general insurance organisations and superannuation funds

Australian Securities and Investments Commission (ASIC)

the government body with responsibility for corporate regulation, consumer protection and the oversight of financial service products

Treasury

the main source of economic policy advice to the government where it influences how governments devise budgets, collect taxes, allocate expenditure, and implement other policies such as monetary policy, labour market policy, and market regulations.

liquidity

the ease with which a financial asset can be transformed into cash so it can be used as a medium of exchange

money supply

the total amount of funds in an economy that can be used as a medium of exchange, a measure of value, a store of value and a method of deferred payment

M3

a measure of the money supply that consists of all currency in circulation and all private sector deposits in banks

interest rates

the cost of borrowing money expressed as a percentage of the total amount borrowed