BWFN3013_Topic 3_Overview of Securities Types.pptx

BWFN3013_Topic 3_Overview of Securities Types.pptx -...

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CHAPTER 3 Overview of Securities Type
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LEARNING OBJECTIVES Classifying securities Interest Bearing Asset Money Market Securities Fixed Income Securities Equities Derivatives Option contracts Mutual Fund
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1.1 CLASSIFYING SECURITIES
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2.2.1 INTEREST BEARING ASSET- MONEY MARKET SECURITIES Categories: Direct borrowing and lending of short term funds in the secondary loans and deposits market The purchase and sale of money market instruments Characteristics of Money Market: A market for short term instruments of a maturity period of one year or less Highly liquid, low risk, low return compared to capital market instruments
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TYPES OF MONEY MARKET Primary Market In this market, the participants are the initial supplier and final users of the short-term funds. Basically, the short-term funds are supplied by the public (i.e. the individuals and corporations), provident or pension funds and also the government and statutory bodies. Secondary Market The secondary market for both categories of the local money market activities refers to the activities among the financial intermediaries. In this segment of the market, funds are mobilised by these institutions among themselves on wholesale basis.
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The Interbank Market The interbank market is the secondary market for loans and deposits. In the primary market, financial institutions obtain deposits and provide loans to their corporate and retail customers. The secondary market, or the interbank market, is concerned with active placement of term deposits among the commercial banks and investment banks. The deposits are placed or borrowed by the financial institutions themselves or through the money brokers.
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The Securities Market The securities market basically involves the sale and purchase of negotiable money market instruments. Trading of these papers is an indirect method of borrowing and lending of funds. Generally, the securities market can be divided into two markets, which are the: (a) outright purchase/sale market, and (b) REPO market.
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MONEY MARKET INSTRUMENTS IN MALAYSIA Money market Instruments issued and traded in the securities market can be categorised as follows: Government papers (government bonds that used as money market instruments) Malaysian Government Securities (MGS) Malaysian Treasury Bills (MTBs) Bank Negara Bills (BN Bills) Government Investment Certificates (GICs) Government Investment Issues (GII) Commercial Papers Cagamas Bonds and Notes Negotiable Instruments of Deposits (NIDs) Bankers Acceptances Private Debt Securities
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MONEY MARKET INSTRUMENTS IN MALAYSIA Treasury Bills Maturities of 3-month, 6-month and one-year Government issues treasury bills when it wants to borrow money from the public to meet its short term cash needs Discounted securities Bank Negara Malaysia facilitates the sale of treasury bills through competitive auction Standard trading amount is RM5 million Actively traded in the secondary market
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