Globalization of the Financial Markets
There are many economies in the world that have opened their gates for foreign participants and companies. Trading takes place not only in the securities of domestic companies, but also in securities of foreign companies that are listed in these markets. There will also be multiple listing of the same securities on all major stock exchanges. Due to these reasons, financial markets witness non-stop activity with transactions taking place round the clock. Financial markets in the US, the UK, Tokyo and Sydney are examples of such markets.
However, for a financial market to globalize its operations, its level of efficiency has to meet the global standards. For the foreign companies and investors to operate, there should be a level playing field for foreigners as well as domestic investors. Open access to membership on all exchanges and suitable technology that ensures transparency in transactions, efficient payment and settlement system, easy flow of information are some of the features which help globalization of markets.
Irrespective of being a national or a global market, the suppliers of funds in these markets will essentially look for adequate returns, high safety and high levels of liquidity while lending their funds. Thus, the borrowers of funds will have to design suitable financial instruments that meet the requirements of the lenders. It is based on such features of the financial assets that the transactions taking place in the financial markets are grouped.