Name: Abragan, Mary Benedict T.

Section: BSA – 1C

The first chapter of the book Financial Markets and Institution by Saunders talks about
the fundamentals of the basic operations of the domestic and foreign financial markets and
institutions. It does describe the ways in which how the funds flow through the system of
economy from the transactions of both the lenders to borrowers and outlined the markets and
instruments that lenders and borrowers do employ in order to complete the process. Beyond
that, the first chapter also discussed the need for Financial Institute managers to fully
comprehend the function and how do the domestic international markets works. It is also
identified the other various factors that do impacts the specialness of the services Financial
Institute to provide and the manner in which they improve the efficiency of the funds that flow
from the supplier of funds to the ultimate users of the funds. Though some of the forces like the
usage of technology and especially the Internet are powerful enough that in the future Financial
Institutes that have historically relied on making profits by performing traditional special
functions such as brokerage will need to expand the array of their financial services that they
sell as well as the way that such services are distributed or sold to their customers.

Chapter 1 Overview:

 Financial Markets: It is the institutions that perform the essential function of channeling
funds from those with surplus funds to those with shortages of funds.
 Primary Markets: Markets in in which corporations raise funds through new issues of
securities.
 Secondary markets: Markets that do trade the financial instruments once they are
issued.
 Money markets: Markets that trades debt securities or instruments with maturities
of less than one year.
 Capital markets: Markets that trade debt (bonds) and equity (stocks) instruments with
maturities of more than one year.
 Foreign exchange markets: Markets in which the cash flows from the sale of products or
assets denominated in a foreign currency are transacted.
 Derivative markets: Markets in which derivative securities are trade
 Financial Market Regulation
o Securities and Exchange Commission
o Main emphasis on full and fair disclosure of information on securities issues to
actual and potential investors
o Required to register securities with the SEC an full describe them