Essay on how finacial markets work

Submitted By ingram67
Words: 980
Pages: 4

Explain how financial markets work in the United States.

Companies issue shares of stock to raise funds for their business. The investor buys stock with the hope that it pays dividends, or earnings. The investor also hopes the price of the stock will increase in value. There is no guarantee that there will be dividends or the price will go up. Investors buy and sell shares in the stock market. This is called a secondary market. The money changing hands does not go to the company. A company is worth whatever the total of it's stock is currently worth. So the company has to show that it has good products and services and that they are earning revenue and profits. If the company is not growing properly then people want to sell the stock and the traded price goes down. If the company is doing well then more people want the stock and the price goes.

There are so many companies that offer stock. There are several exchanges or stock markets. The New York Stock Exchange. Since there are so many companies someone invested the Dow Jones Industrial Average. Certain companies are in it and the Dow Jones company has a formula for determining the number. If the number goes up the companies in the DJIA are more valuable
Financial markets are physical locations or electronic forums that facilitate the flow of funds amongst investors, businesses, and governments. locations or electronic forums that facilitate the flow of funds amongst investors, businesses, and governments What are the financial markets? If you are confused, there is a good reason. That's because financial markets go by many terms, including capital markets, Wall Street, even the markets. Some experts even simply refer to it as the stock market, even though they are referring to stocks, bonds and commodities.
Quite simply, that is what the financial markets are - any type of financial transaction that you can think of that helps businesses grow and investors make money. Here is an overview of the financial markets, from the simple to the complex.

Stocks and Stock Investing
Stocks are shares of ownership of a public corporation that are sold to investors to allow the companies to raise a lot of cash at once. The investors profit when the companies increase their earnings, which keeps the U.S. economy growing. It's easy to buy stocks, but takes a lot of knowledge to buy stocks in the right company.
Stock and corporate bond market regulation
The stock and corporate bond markets are the most prominent. Regulators are active and visible because these markets have a relatively large number of relatively small issuers. There’s not one government issuing currency — there are a whole bunch of companies issuing shares of stock.

The U.S. Securities and Exchange Commission (SEC): The SEC is a government agency that ensures that markets work efficiently.

Financial Industry Regulatory Authority (FINRA): FINRA represents and regulates all stock and bond brokerage firms and their employees. More than 4,750 firms are members, with 634,000 employees registered to sell securities. It also administers background checks and licensing exams, regulates securities trading and monitors how firms comply, and provides information for investors.

Treasury bond market regulation
Treasury bonds are slightly different from corporate bonds. They're issued by the U.S. government, so regulation is handled by the Treasury Department’s Bureau of the Public Debt, with additional oversight from the SEC.

Derivatives market regulation
Derivatives markets have their own regulatory bodies, but they match the format and hierarchy of stock and bond market regulation. The organizations may not be household names, but their functions will seem familiar.

Commodity Futures Trading Commission (CFTC): The CFTC is a government agency that oversees market activities in agricultural and financial commodities. It ensures that the markets are liquid and that both parties on an options or…