TOPIC 1; OVERVIEW OF EQUITY MARKETS AND STRUCTURE

A financial system is the set of global, regional or firm-specific institutions and practices used to facilitate the exchange of funds.

components of financial system

There are five Basic Components of Financial System;

1. Financial Institutions
2. Financial Markets
3. Financial Instruments (Assets or Securities)
4. Financial Services
5. Money

Primary and secondary markets for equity securities

The primary market is where securities are created. It’s in this market that firms sell (float) new stocks and bonds to the public for the first time.

The secondary market is commonly referred to as the stock market

There are four types of market orders in trading equity securities:

• Market Buy Order: It is an order to purchase a security at the current market price.
• Market Sell Order: It is an order to sell a security at the current market price.
• Limit Buy Order: It is an order to purchase a security at a specific price or lower.
• Limit Sell Order: It is an order to sell a security at a specific price or higher.

Factors to consider when making foreign equity investment

1. Political and economic stability
2. Market conditions
3. Company financials
4. Competition
5. Legal and regulatory environment
6. Exchange rate risk
7. Cultural differences