Course Code and Title : Finp 4 - Monetary Policy And Central Banking

Professors : Prof. Geric Baliao - MBA

: Prof Teresita F. Fernandez -MBA

Lesson Number :10

Topic :FINANCIAL INSTITUTIONS
Money and Capital Markets

LEARNING OBJECTIVES:
At the end of this lesson, the student should be able to:
1. Define and understandFinancial Market, Money and Capital markets
2. Distinguish each type of market.
3. Raise awareness of the Financial Markets’ environment and organization.

MODULE PRE-ASSESSMENT
Direction. Write your answer on the space provided.
1. ______ shall refer to a mechanism through which buyers and sellers are brought
together to exchange financial goods, services and assets.
2. ______ A process where an underwriter (usually banks and investment houses)
acts as a middleman in the sale of newly issued securities either by selling the
securities on a “best effort” basis or by purchasing securities on a firm commitment
3. _____ A type of financial market that is short-term lending and borrowing of funds
in order to meet immediate liquidity and/or working capital needs
4. ______ A type of financial market where participants raise long-term funds to
meet capital requirements
5. _______ It is the national stock exchange of the Philippines.
6.
I. LESSON PRESENTATION:

What is a Financial Market?

• A mechanism through which buyers and sellers are brought together to exchange
financial goods, services and assets

• An organized venue where

economic players may raise needed
funds and operate residual funds
through transactions in financial
instruments

Types of Financial Markets

Types of Cash Market:

The Money Market

 Short-term lending
and borrowing of
funds in order to
meet immediate
liquidity and/or
working capital
needs
 Involves highly liquid financial instruments that have original maturities of one
year or less
 Treasury bills, cash management bills
 Short-term commercial papers, certificates of deposit, bankers acceptances

The Capital Market

 Participants raise long-term
funds to meet capital
requirements
 Involves financial instruments
that have original maturities of
more than one year
 Long-term debt securities
 Equity securities
 Hybrid securities
Organization of the Bond Markets

Securities Underwriting
• A process where an underwriter (usually banks and investment houses) acts as a
middleman in the sale of newly issued securities either by selling the securities on a
“best effort” basis or by purchasing securities on a firm commitment
• Typically underwriting is done by an investment syndicate with a lead or primary
underwriter

Trading in Philippine Bond Market

• Only Government Securities Eligible Dealers (GSEDs) are allowed to participate
in the primary market for government securities.
• Households access the bond market through GSEDs
• The secondary market trading for bonds in the Philippines is done through
Philippine Dealing Exchange (PDEX).
• The corporate bond market generally consists of commercial papers with private
bond issuances limited to a handful of blue chip corporations.
Organization of the Stock Market

Overview of the Philippine Stock Market

 The Philippine Stock Exchange (PSE) is the national stock exchange of the
Philippines.
 The PSE index (PSEi) is the main PSE index. It is composed of the prices of 30
companies

Trading in the Philippine Stock Market

 To be able to participate in the stock market, investors will have to create an

account with a stockbroker
 To execute orders, stock broker will match trade order with other stock brokers
through telephone or electronic platforms such as Reuters

GENERALIZATION
The student was ableto define and understand the financial market, and likewise
distinguish each type of market-money and capital markets. Further, the students were
able to raise awareness of the financial markets’ environment and organization.

REINFORCEMENT
1. Based on the available online data from either digital or paper, describe the recent
performance of the Philippine Bond Market. Please indicate your reference/sources.
2. Based on the available data on either digital or paper, describe the recentperformance
of the Philippine Stock Market. Please indicate your reference/sources.

References:
https://www.bis.org/publ/bppdf/bispap35s.pdf
http://www.bsp.gov.ph/monetary/overview.asp
https://photius.com/countries/philippines/economy/philippines_economy_monetary_polic
y.html
https://link.springer.com/chapter/10.1007%2F978-1-349-16454-7_7
https://www.thebalance.com/what-is-monetary-policy-objectives-types-and-tools-
3305867