Essay on Financial Markets

2021-07-03 15:29:01
2 pages
407 words
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Boston College
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Essay
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The proponents measure of the organized financial market structure configures pragmatic regulation which helps to strengthen sanity in financial markets (Wee, 2016). For example, the financial market comprehends a full disclosure system where the information required by the Securities and Exchange Commission (Sec) is unveiling procedurally. The disclosure regulation proclaims the fact that other insider trading will not enhance the firms advantage to determine or influence the price of financial instruments thus hinders the inconsiderate setting of prices by demand and supply market forces. The structure also configures the comprehensive regulations where the prices of assets are ostensible to the available information and factors of a financial instrument.

The liquidity function regulation is established by the Central Bank monetary policies which include the demand deposits requirements ensuring that funds owners may withdraw their investment funds at their own pleasure (Foley, 2016). Moreover, the financial market substantiates a secondary market platform where financial investors can easily buy or sell financial instruments from other investors. This structured policies within the financial markets platforms highly facilitate liquidity since the absence this measures will instigate non-existent of capital gains.

The hindrances of structured, organized markets

The pragmatic regulation and supervision substantiated by the financial markets also hinder the performance of the structured functions. For example, is a situation where the federal bank requirement of demand deposits is too high that leaves the financial institutions with too little funds to issue in form of loans that force the banks to charge high-interest rates to surpass the demand

The impact of recent changes and trends had on the markets ability and functions

The focus on Dodd-Frank act which stipulates a situation where the when a firm grows tremendously, there should be a provision for the reserve requirement that ensures that the firm will not fail. The current trends hinder the firms from subduing excess funds that are needed in the market thus inhibits the firm's liquidity (Wee, 2016).

The current Trump tenure provides reviews on the requirements of the act by ensuring that lenders should not discriminate irrespective of the credit rating index. For example, (12 CFR 202- Equal Lending opportunity) regulations accentuate a different measure with the deliberate Dodd-Frank act by enhancing an indiscriminate lending of funds to the borrowers even though they are not credited worthy. This current amendment will change the functions dynamically to the better liquidity of noncredit worth firms while increasing the chances of losing of funds by the investor to credit risk borrowers.

 

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