Global Financial Regulatory Framework Regulating International Capital Market Masters in Accountancy (MACC508)

Definition Capital Markets are a system in which people, companies and governments with excess funds transfer those to fund to people, companies and government that have shortage of funds; The capital markets in an institutionalized way provides the mechanism in which the transfer operates for those who wish to transfer or receive funds.

Definition Capital market is a market where buyers and sellers engage in trade of financial securities like bonds, stocks, etc. The buying/selling is undertaken by participants such as individuals and institutions. Capital markets help channelise surplus funds from savers to institutions which then invest them into productive use. Generally, this market trades mostly in long-term securities.

Definition Capital markets are financial markets for the buying and selling of long-term debt or equity-backed securities

Continued… Transfer of fund can be in form of Equity or Debt; Equity – money that is invested for return of percentages of ownership but not guaranteed in terms of repayment. Debt – money that is borrowed and must be repaid.

Structure of Capital Markets Primary Market – This is where new issues of stock and other securities (stocks and bonds) are traded. This market is include banks etc. Secondary Market – This is where existing securities are traded. Secondary market includes stock exchanges likes New York, London, Zimbabwe Stock Exchanges

Features of Primary Markets This is the market for new long term equity capital. The primary market is the market where the securities are sold for the first time. Therefore it is also called the new issue market (NIM). In a primary issue, the securities are issued by the company directly to investors. The company receives the money and issues new security certificates to the investors.

Features of Primary Markets (Cont.) Primary issues are used by companies for the purpose of setting up new business or for expanding or modernizing the existing business. The primary market performs the crucial function of facilitating capital formation in the economy. The new issue market does not include certain other sources of new long term external finance, such as loans from financial institutions.

Feature of Secondary Markets also called the aftermarket, previously issued financial instruments such as stock, bonds, options, and futures are bought and sold; assets can vary from loans to stocks, from fragmented to centralized, and from illiquid to very liquid.

International Capital Markets These are capital markets that allows people, companies and government to borrow or invest across national boundaries. International capital markets provides high returns and cheaper borrowing, and help diversify risk.

The need for regulation Harmonisation of markets Consistency of practices Managing the growing trend of development (financialisation or financial engineering);

Capital Market Regulation Framework Global/ International RegionalCountry RegionalCountry

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