US Financial Markets: Characteristics

The expression "financial market" has a wide meaning. This term refers to any site on which an organized process of trading in securities takes place: stocks, bonds, currencies and derivatives. The largest in the world are the financial markets of the United States. Their turnover is estimated at trillions of dollars. Every day there are transactions with shares of several thousand companies. The analysis of the financial markets of the United States is practiced by virtually all economists of the world, since the events on the American trading floors have an immediate impact on other countries.

History

Equity securities appeared in the 17th century inthe transition from feudalism to capitalism. The first international trading companies, such as the famous East India, sought to attract investment. The need for transactions with shares triggered the creation of stock exchanges in European countries. The industrial revolution contributed to their spread and development.

Debt obligations are known from time immemorialtime. They were used in ancient civilizations long before our era. Some Sumerian cuneiform tablets, discovered during archaeological excavations, are, in the modern understanding, bills of exchange. The practice of issuing government bonds was widely spread already during the Napoleonic wars. A successful operation with British debt securities, carried out on the London stock exchange by one of the representatives of the Rothschild dynasty during the Battle of Waterloo, became history.

Formation in the USA

In North America in the second half of the 19th centuryThe rapid development of industry has made extremely popular investments in shares of various companies. The financial markets of the USA have considerably outstripped the European in scale and degree of influence on the processes taking place in the economy. In addition, in America, a detailed legal mechanism for the organization of trading in securities was developed.

Characteristics of the US financial market

In the course of history, two modelsattraction of investments. The first, focused on bank financing, is called continental. Its distinctive features are non-public offering of securities, a relatively small number of shareholders and a low level of development of the secondary stock market. In this system, the main role is played by bond borrowings, and the position of key participants in the capitalization process of companies is occupied by large commercial banks. It can not be said that the continental model of the financial market is typical for the United States. Rather, it is characteristic of European countries and Japan.

The second model of investment attraction is calledAnglo-Saxon. Its main features are a high share of the share capital, limited participation of banks in lending to the economy and the existence of a large number of different investment funds. For the financial markets of the USA this model is typical. About one hundred million American citizens invest their money in stocks. The use of securities as a tool for saving and multiplying has long been a tradition. Detailed information about the features of the American model can be found on the Internet in the format pdf. The US financial market ranks first in the world not only in volume but also in branching.

Brokers

American stock markets providewide opportunities for issuers (companies that raise capital by issuing shares), and investors. Brokers act as intermediaries between those who wish to buy and sell securities. Professional bidders are divided into two categories. The former are called full-cycle brokers. They not only conclude transactions in the interests of their clients, but also provide consulting services. Full-cycle brokers provide analytical information, help in making decisions on the formation of investment portfolios, and provide advice on limiting losses in the event of an unfavorable situation. For their work they take very high commissions. Brokers of the second category are called discount. Their clients independently make investment decisions. For a small fixed fee discount brokers execute orders for the purchase or sale of securities.

Speculation

The US financial markets are divided into primary and secondarysecondary. Companies wishing to attract investments are issuing shares and placing them on the stock exchange. At this stage, relating to the primary market, capital flows into the economy. Subsequently, securities fall into free circulation on stock exchanges and often change owners as a result of buying and selling transactions. This is called a secondary, or speculative, market. In this case, money does not flow into the economy, but goes from one trader to another.

Regulation

The modern model of the US financial marketIt is characterized by the presence of strict control by the state authorities. American laws regulating exchange activities are considered to be among the most stringent in the world. The legal mechanism, which has been improved for many decades, excludes the possibility of manipulation and protects the rights of issuers and investors. The Commission for the Securities Market, established in 1934, continuously monitors signs of using insider information and prosecutes bidders who violate the rules.

Customer accounts in brokerage companies are subject tocompulsory insurance. In the event of bankruptcy of a financial organization, losses of non-professional bidders are compensated from the funds of a special fund. The exchanges perform clearing on a daily basis, in the course of which they check that brokerage companies have sufficient money to ensure open positions.

To prevent panic crashes in the USThere are strict rules that limit the possibility of playing on a slide. Bidding stops when the market indices fall by a certain amount of interest within one day. Stock exchanges have the right to introduce a complete ban on the opening of short positions. Futures and options for increasing volatility automatically increase the requirements for a minimum amount of collateral.

OTC market

At the end of the 20th century, decentralizedSystems that organize transactions with securities. They made a serious competition to the classic stock exchanges. The most striking example of such a system is known under the acronym NASDAQ, which means "Automated quotations of the National Association of Securities Dealers". This market has become the world's first fully electronic stock market. Another revolutionary innovation - NASDAQ - is the availability of a large number of competing market-makers (liquidity providers). Users of the decentralized system have the opportunity to obtain the best quotation. NASDAQ specializes in trading high-tech companies. More than three thousand issuers passed the listing procedure. The system of automated quotations NASDAQ received the status of a licensed exchange and became the second largest financial market in the United States. In 2016, its capitalization exceeded six trillion dollars.

Futures market

Conclusion of transactions for the purchase and sale of variousgoods with deferred delivery and payment has been practiced since ancient times. Today, the US is influenced by the huge volume of futures trading on the world financial market. The largest on the planet platform for operations with fixed-term contracts is the Chicago Mercantile Exchange. It is traded futures for oil, natural gas, gold, silver, platinum and palladium. On the Chicago Mercantile Exchange, world prices for many types of raw materials are being formed. The total volume of transactions with futures is estimated at trillions of dollars and is tens of times higher than the turnover of the cash market.

Crises

The American economy has repeatedly experiencedserious shocks. In 2000 there was a catastrophic collapse of securities of high-tech companies. First of all, this dealt a heavy blow to the OTC market of NASDAQ. Optimism about the prospects of business development associated with information technology, was unjustified. This caused a wave of bankruptcies of Internet companies and the fall of the NASDAQ stock index.

The terrorist attack on the World Tradethe center in 2001 led to a multibillion-dollar economic loss and the closure of the New York Stock Exchange for a week. The general decline in the stock market was partially offset by the growth in stock prices of pharmaceutical and food companies.

The mortgage crisis of 2008 led to bankruptcylarge financial institutions and the loss of several million jobs. According to some estimates, the US economy lost one trillion dollars. The crisis has caused the most severe collapse of the stock market over the past 20 years. The main US stock indexes fell by 30-40% in a few months.