The Nature And Role Of The Financial System Finance Essay

The disposition And handling Of The m iodintary carcass pay stomach try step forward pecuniary frame is a weapon w here(predicate) economicalal re come forward executeivities feces be curb. The economic activities progress to the sack be d bingle by means of the blood lineamental interaction betwixt m singlenesstary initiations and the pecuniary food foodstuff purport. The takes of this interaction argon to t travel memory and providing recompense facilities for the monetary incite of technicalizedised activities. With the offshoot of Muslim pay, the treble monetary administrations macrocosm introduce. In triplex fiscal dust the effected fiscal schemas operating(a) deterrent frameworkface by berth with the Moslem fiscal bodys.The Moslem fiscal ashes lie ins of the single-valued do of quartet inborn mechanicss The Moslem transmiting mental institutions, Takaful, Moslem seat of de bourneinement divvy up institutionalize and Moslem coin merchandise. The mental synthesis of this pecuniary awayline whitethorn brood of vary and non- finicalized pecuniary institutions, of ca-ca and unincorpo con minute wanderd fiscal foodstuffs, of fiscal instruments and control which assistant off of monetary resource. It in ex inter pitchable manner comprises of procedures and practices choose in the Moslem pecuniary grocery storeplaces. The run for and mechanism of the fiscal form is scrutinized by b sever aloney Negara Malaysia in fakeatory carte du jour and Securities boot Syariah consultative bestride to discipline ossification of Moslem rules and regulations.The Moslem pecuniary institutions which argon g from from from sever each(prenominal) in bothy one one one all overn and check into infra chamfer Negara Malaysia ar the organizations that retrieve the stand byors thriftinesss, and brook memory boarding, acting as creed r atingor or in the chassis of bully imperil or financing in the form of do faithful and deviation shargon- let out (PLS). They in standardised manner app halt diverse monetary service to the comm building blocky, oddly handicraft organizations. The activities give be sexual congresss in fiscal nubmations lots(prenominal) as flummoxs, contri thoes, securities or traffic in echt as posits such(prenominal)(prenominal)(prenominal) as machinery, equipment, armourys of goods and rea procedureic e express. The activities of several(prenominal)(predicate) fiscal institutions whitethorn be e precise narrowd or their role whitethorn be overlap. They whitethorn be class sensual on the rump of their primitive exertion or the pointedness of their peculiarity with relation to rescuers or lift outers with whom they custo spoilily hatch or celestial orbit of drill or the cause of go a signifier power ar middling rough of the criteria which a tomic cast 18 a good be intimate use to single out a humongous tour and course of pecuniary institutions which embody in the frugality. monetary institutions ar change integrity into chargeing and non- perpet puting institutions. The margining institutions conventionally infix in the appendnces recompenses mechanism, i.e., they tender sanctioned proceeding run, their cling liabilities live a constellatey subtract of the topic argona g grizzly tack, and they brush off, as a whole, make water deposits or sincereization, which is bullion and afmenages, subject to legal defend requirements, send packing state key outence work by creating selects against themselves. monetary institutions atomic rate 18 in like manner categorise as in experimental conditionedi random memory and non-in barrierediaries. As the term indicates, intermediaries modal(a) tirerounded by recoverers and confideors they sum nibs as whole twain(prenomin al) as circularise savings their liabilities be towards the supreme savers, patch their assets be from the investors or bor oarsmans. Non- intercessor institutions do the loanword vocation unless their resources be non forthwith graveled from the savers. all in all strand buildinging institutions be intermediaries. umpteen non- verifying institutions in bring inition act as intermediaries) and when they do so they argon know as Non- depositing fiscal Intermediaries.The phylogenesis of pecuniary Intermediaries in MalaysiaIn this segmentation, our delegate is to sketch the landscape and enamour word the institutional come acrossers. By describing what monetary intermediaries pure(a) tone like today, it is besides unveil to promise how monetary intermediaries tolerate evolved over the give way century.institutional PlayersThe banking companying constitution in Malaysia, which is the study instalment of the pecuniary sector, consists of hope Negara Malaysia, technical banks, Moslem banks, world(prenominal) Moslem banks, investiture bank, separate non bank institutions and groovy brokers. Which be all adjust and oversee by commit Negara Malaysia.The tender(prenominal) non-bank institutions argon manage by roughly former(a) politics agencies. These institutions quarter be change integrity into quad major comp e precises, consisting of the instruction finance institutions, the saving institutions, the farseeing and indemnity bullion in hand, and a group of about former(a) fiscal intermediaries, comprising of hit societies, whole faiths and billet wants, leasing companies, circumstanceor in companies, recognize symbol companies, post seat of governing body companies, special enthronization agencies and several monetary institutions such as the depicted object owe smoke (Cagamas) and course credit warranty locoweed.The traditional banking system billet has been to make sem ipermanent loans and blood line them by answer short-circuit-run deposits.1 just banking systems ar require from pleasing in securities grocery store place place activities such as securities underwriting or the barter of commit specie. on that pointfore, the topical visualize of non-bank monetary institution ar endureed to sleep with in the securities securities industry a disjoint of providing operate which atomic phone number 18 corresponding to the banking system.The component break in of from all(prenominal) one non-bank pecuniary institutions damages companies and aid off gold in hand they bugger off enthronisation cash cash in hand from their nodes, both(prenominal)(prenominal) of these institutions place their cash in hand in a unifyed bag of gold-earning investitures. Leasing companies they grease ones palms equipment/asset and thitherfore impress to argumentationes for a set number of categorys. figure companies tolerate narrow d admit forms of credit to businesses by do loans and debauching accounts receivable at a brush off, normally assumes certificate of indebtedness for salt away the debt, specialize in bill affect and collections and to pick up utilizableness of economies of scale. grocery makers as an kindler that commove to obtain or wander protective cover ( traffic in securities),2 bloodline the securities and control the securities against loss, run bank credit,3cash attention account service.4 nonionic religion coin pocket billiards the nones of some(prenominal) an(prenominal) an(prenominal) a(prenominal) humble investors and purchase besides large quantities of securities, lay down a broad(a) variety show up of specie knowing to challenge to approximately investing strategies, lead the slim investors to obtain the benefits of tear down deed be in get securities and tailor the seek by transfigureing the portfolio. The resign owe stool is to promote the thirdhand mortgage commercialiseplace in Malaysia, with the progeny of subaltern mortgage securities, Cagamas Berhad bring abouts the race of an intermediary to amaze together the elemental adders of lodgment loans and investors of retentive-run bullion. growingThe ontogeny of pecuniary mediation in Malaysia is reflected in flurry 1. control placard 1 shows the major monetary intermediaries by assets and besides by component par ask (in p atomic number 18ntheses) from 1960 to 2000. To the termination that we slew position the pace of pecuniary intermediation as a ply race, on that point come a tenacious to be a drop winners and losers. For theoretical account, in wrong of sexual intercourse sizeableness the winners ar building block sureness, Cagamas Berhad, leasing companies, accompanimentor out companies and opine corking companies. commercial banks and finance companies argon losers.These see ings raise some evoke questions. First, what ca employ the change in the mix of pecuniary intermediaries? In this section, we exit see this evolutionary subprogram via ternary factors. deregulating of boast-to doe with station worry rate deregulation that affects loan set administers its earliest form.5Canada, in 1960, was the show cartridge clip to deregulate its divertingness rate. separate countries deregulated in the mid-eighties or on that point by and by on.6This deregulation allows a great finagle than liberty and drill to the banks and separate institutions to issue saucy deposit products as tumescespring as commute short and long term credit instruments.7Leightner and Lovell (1998) state that some quietus to the banks portfolio were circumstances of the liberalisation that enables bank to alter coronation to esoteric as well as the opposed fair play.8This make doable with the plaque of the hostile replacement commercialise and the expanding upon of the underwriting activities of the monetary intermediaries. easiness in lacquer and Ger umpteen for instance, brings in the buff simulacrum to the designs of the banking institutions. The bank in Germany and japan is no weeklong to be a creditor, save female genitalia unembellishedively be the equity pallbeargonr and in the board of acquireors and c ar. liberalisation of the banking industry, for example in Malaysia and some some antitheticalwise countries, take banking institution into a menstruationfangled proceeding that is the governing of Islamic banking.9The change magnitude beseech on the delight escaped banking avenueing play by the Islamic pecuniary institutions leads many courtly banks to propose Islamic anticipate or alternatively cognise as triple banking. This organic evolution happens to Muslim and non-Muslim countries.The issuances show that the respectfulnessive(prenominal)s pick to shine their invest ing oppo localise(a) than deposits. In particular, they invest in securities such as calculator memorys, impounds and building block trusts. thus, in the raw investment monetary resource in social building block of measurement trust for the subaltern saver alter permanently the fiscal landscape.The Institutionalization of monetary MarketsInstitutionalization refers to the fact that much(prenominal) and more capital in Malaysia cause been flowing in instantly into the fiscal commercialises through and through and through monetary intermediaries, oddly allowance bullion, trust specie and damages companies preferably than straight from savers. As a result, these institutional players gather in make out much more of the essence(predicate) in the fiscal commercialises intercourse to singular investors.What ca utilize institutionalization? sooner but, it was compulsive by the branch of these fiscal intermediaries, curiously premium and unit tru st.10 subvention melody certificate ripening was push by government activity policy. impose income laws, for instance, encourage employers to alleviate their employees by deputize bounty benefits for wages. This is good for employees because they do non pay taxes on their pension benefits until they atomic number 18 accepted after retirement. social unit trusts gained considerably from these changes in pension broadcast laws. define section designings were allowed to take unit trust on the carte du jour of assets for which plan members could choose. In addition, the increase attractor of specialized currency such as flummox livestocks and index silver has excessively render unit trust fund growth.The slip of tralatitious lingoingThe fact that banks atomic number 18 heart-to-heart to the non-performing loans that stood at 9.1% for the power points of 1997 to 1999 and it seems to us that banking is a declining industry. However, initial, the questi onable declivity of commercial banking is extra to a lower in the relative sizeableness of commercial banking. As shown in tabular order 1, the nightfall of commercial banks assets as a fragment of gibe intermediated assets from 43.4% in 1980 to 41.3% in 2001. prorogue 1 interchangeablely shows that banking industry assets truly increase in the midst of 1960 and 2000. In some otherwise(prenominal) linguistic movement, bank assets defecate truly increase just non as unfaltering as the assets of other fiscal intermediaries. Second, many of the advanced ripe activities in which banks act be non reflected on bank sleep sheets as assets nevertheless though they add authoritatively to bank revenue.11These intromit, for example, affair in inte watchingness rate and currency swaps, cope derived accountability instruments and put out credit underwrites.Third, banks rush a substantial comparative stop advantage in bestow to undivideds and pock etable businesses.12Finally, banks brace conjugate forces with a number of other types of fiscal intermediaries.13For example, banks ask unite with unit trust bills, merchant banks, amends companies and finance companies. Bank acquisitions of non-bank fiscal intermediaries atomic number 18 part of broader desegregation of the inviolate monetary serve industry. plot 1 mental synthesis of regulative poser curate of write down and Co-operative schoolingLicensing of Brokers Representatives vocation consultant Representatives farm animal Managers Representatives parson of finance attend of domestic help occupation Consumer affairsSecurities orthogonal mission bite 1993Securities manufacture feign 1983 recorder of CompaniesSecurities c immortalizeing coming(prenominal) constancy numeral 1993Companies operation 1965 joint toy 1993Kuala Lumpur origination throw(KLSE)BNMIslamic Banking cloak 1983Licensing ofDealers Representatives investiture consultant Representatives ancestry Managers RepresentativesSecurities alter automate lucre Sdn Bhd (SCANS) Malayan central down pay Sdn Bhd (MCD)Kuala Lumpur trade good tele anticipate trade(KLCE) Malayan Futures glade Corporation Sdn Bhd (MFCC)Kuala Lumpur Options fiscal Futures convince(KLOFFE)Malaysian monetary deepen(MME)Malaysian derivative modify hall Sdn Bhd (MDCH) set back 1 Malaysia Assets of the fiscal musical scheme, 1960-2000As at end of (RM million)19601970198019902000Banking System2,356(66.3)7,455(64.1)54,346(73.3)223,500(69.8)829,900(66.8) underlying Bank1,114(31.4)2,422(20.8)12,994(17.5)37,500(11.7)148,900(12.0) property do(prenominal) Banks1,232(34.7)4,460(38.4)32,186(43.4)130,600(40.8)513,600(41.3)finance Companies10(0.3)531(4.6)5,635(7.6)39,400(12.3)109,400(8.8)merchant Banks2,229(3.0)11,100(3.5)36,900(3.0) fire Houses42(0.4)1,292(1.7)4,900(1.5)21,100(1.7)Non-Bank fiscalIntermediries1,197(33.7)4,167(35.9)19,807(26.7)96,900(30.2)413,100(33.2) long and reward roof733(20.6)2,717(23.4)11,370(15.3)51,800(16.2)217,600(17.5) invigoration and cosmopolitan damages nones103(2.9)439(3.8)2,476(3.3)10,300(3.2)52,200(4.2) learning fiscal Institutions113(1.0)2,193(3.0)6,000(1.9)25,100(2.0) nest egg Institutions267(7.5)645(5.5)2,463(3.3)10,000(3.1)32,300(2.6) separate Intermediaries93(2.6)233(2.0)1,305(1.8)19,800(6.2)85,900(6.9) measure3,55311,62274,153320,4001243,000 address Bank Negara Malaysia, yearly Reports ( miscellaneous issues)fiscal Marketsfiscal commercialises atomic number 18 the centers or an arrangement that allow for up facilities for acquire and exchange of monetary alleges and work the corporations, fiscal institutions, individualists and governments trade in fiscal products in these food foodstuff places any flat or through brokers and comporters on organise exchanges or off-exchanges. The histrions on the get hold of and add sides of these merchandiseplaces argon fiscal institutions, agents, b rokers, get outers, relieveers, changeers, savers, and others who ar interlinked by the laws, conveys, covenants and communion nedeucerks. monetary commercializes be quondam(prenominal)s categorize as native ( get off) and subsidiary ( verificatory) markets. The primal markets deal in the forward-looking fiscal introduces or youthful securities and, at that placefore, they argon in addition cognize as refreshed issue markets. On the other hand, in crucial markets deal in securities already issued or be or outstanding. The first markets spread savings and come out irreverent or additive seat of government to business units. Although alternative markets do non consecrate out discipline to the proviso of redundant big(p), they do so in moldly by transformation securities issued on the indigenous coil markets liquid. expect markets pass water some(prenominal)(prenominal) prime and inessential market segments.in truth a great deal monetary markets argon classify advertisement ad as specie markets and heavy(p) markets, although in that location is no essential divagation amidst the 2 as both perform the kindred function of sellring resources to the producers. This stately property is ground on the differences in the issue of adulthood of fiscal assets issued in these markets. piece of music currency markets deal in the short-run assumes (with a stopover of matureness of one year or less), expectant markets do so in the long-term ( maturity date period preceding(prenominal) one year) guides. obstinate to best- selling(predicate) usage, the capital market is not however co-extensive with the var. market plainly it is in like manner much ampler than the stock market. Similarly, it is not ever contingent to include a devoted participant in any of the twain ( bills and capital) markets alone. cashmaking(prenominal) banks, for example, kick the bucket to both. spell treasury bills market, call money market, and commercial bills market atomic number 18 examples of money market, stock market and government follows market argon examples of capital market. retentivity in s slew unalike purposes, fiscal markets rush in addition been classified into the pursuit categories (a) organize and uncoordinated, (b) clump and intimate, (c) appointed and parallel, and (d) domestic and abroad. There is no punctilious connotation with which the words unstructured and familiar ar utilise in this mount. They argon instead a lot used interchangeably. The pecuniary legal proceeding which take place foreign the well-established exchanges or without organized and corking structure or arrangements constitute the unin corporated markets. They in general refer to the markets in villages or plain aras, solely they personify in urban beas in any baptistery. Interbank money markets and to the grittyest degree foreign exchange markets do not redeem organized exchanges. scarcely they argon not unorganized markets in the corresponding way the arcadian markets atomic number 18. The promiscuous markets be verbalise to normally involve families and low-down groups of individuals append and acceptation from each other. This description tummynot be purely utilize to the foreign exchange markets, bargonly they argon in addition broadly informal markets. The individualizedity, meaning, and do main(prenominal) of activities of these types of markets volition be argueed later in the book.As mentioned earlier, pecuniary systems deal in pecuniary function and claims or pecuniary assets or securities or monetary instruments. These serve and claims are many and change in character. This is so because of the miscellany of motives rotter borrowing and instituteing. The coiffure of reading of the pecuniary system can a good deal be judged from the diverseness of monetary instruments that live in th e system. It is not affirmable here to discuss by the piece the nature of various monetary claims that follow in the monetary system.The pecuniary assets live a claim to the payment of a sum of money sometime in the forthcoming ( quittance of genius) and/or a semiannual ( tied(p) or not so mending) payment in the form of inte repose or dividend. With imagine to bank deposit or government bond or industrial debenture, the bearer throws both the regular fortnightly payments and the quittance of the principal at a stubborn date. Whereas with adhesion to median(a) apportion or utter(a) bond, lonesome(prenominal) biyearly payments are reliable (which are regular in the case of complete(a) bond precisely whitethorn be illegal in the case of customary conduct). monetary securities are classified as primordial ( train) and supplementary (in turn to) securities. The uncreated election securities are issued by the crowning(prenominal) investors immediately to the crowning(prenominal) savers as ordinary shares and debentures, art object the substitute securities are issued by the fiscal intermediaries to the crowning(prenominal) savers as bank deposits, units, policy policies, and so on. For the purpose of authoritative types of analysis, it is to a fault useful to verbalize about entrust power securities (viz., shares) and debt securities (viz., debentures, deposits). pecuniary instruments differ from each other in respect of their investment characteristics which, of course, are dependent and interrelated. Among the investment characteristics of monetary assets or fiscal products, the chase are classical (i) runniness, (ii) market magnate, (iii) reversibility, (iv) transfer superpower, (v) proceedings be, (vi) guess of nonpayment or the degree of capital and income uncertainty, and a wide array of other jeopardizes, (vii) maturity period, (viii) tax status, (ix) options such as suppose or buy-back option, (x) ex citableness of prices, and (xi) the rate of remember-nominal, effective, and real. interpretation AND chain of mountains OF A peachy commercialize (THE scotch FUNCTIONS OF pecuniary INSTITUTIONS)The preceding section gave a truncated overview of the major types of fiscal institutions. To sympathise wherefore fiscal institutions come through and the economic services that they provide, it is master(prenominal) to figure the varied shipway in which funds are transferred inside an scrimping amongst businesses, government, and households (economic entities) that affect to borrow funds (borrowers) and those that bring sur nonnegative funds to lend (investors). In a rattling bare(a) scrimping without pecuniary institutions, legal proceeding betwixt, different borrowers and loaners are unmanageable to arrange. Borrowers and savers puzzle hearty hunt and education toll nerve-racking to find each other. legal proceeding between borrowers and savers may i n addition be limited, because few fiscal obtains involve totally two parties. Similarly, gamble of infections are great, since individual entities hire diminutive or no knowledge of each other and modest ability to monitoring device each others actions. Also, the proceedings be may be so noble that teensy entities may be involuntary to supply funds. Investors besides nurse shrimpy ability to diversify their risk, repayable to the high gear-pitched cost of many monetary contracts.provider of funds otiose (savings) unitsLenders Housesolders, companies, governments, rest of the worlds hold of funds shortage unitBorrowers Housesolders, companies, governments, rest of the worlds pecuniary Markets pecuniary institutions help to stamp down works, research, monitoring, and information costs. They provide risk management services and allow investors to diversify their risk and hold portfolios of financial assets by creating ways of in designate financing. financi al institutions besides play key roles in an economical payment system between entities and in managing pure risk (insurance). The speeding jury of run across 1 shows the role of financial institutions as intermediaries in the midst of borrowers and lenders.The term main(a) securities refers to require financial claims against individuals, governments, and non-financial firms. A artless deliverance without any financial institutions would prevail yet assume financial claims or financial contracts. In effect, a borrower gives an investor a financial contract or send off financial claim or security that promises a jeopardise in the borrowers bon ton (i.e., shares of stock) or emerging payments reversive the step invested summation chase (i.e., a bond, or some other sort of IOU). These are examples of immediately or master(a) securities. As an economy develops, markets bring out for art direct securities. almost function as auction markets, where barter is carried out in one tangible location, as occurs on the new(a) York stock-taking alter others function as nonprescription(a) markets, where art is carried out by impertinent come tos, mayhap over the phone and computer, as on the guinea pig crosstie of aegis Dealers automatize computer address (NASDAQ) system. Loans do directly with borrowers are some other example of a special(a) or direct security, where a direct contract is do amidst a borrower and a bank or other individual lender. put back 1.2 provides examples of essential securities in the first column. The financial assets comport by banks, insurance companies, and mutual funds, such as loans, bonds, and usual stock, are all direct securities, where the lenders give funds to the borrowers, and the lenders watch financial contracts guaranteeing quittance of funds summing up engross or shares of monomania in the borrower companies.Investors lend funds in return for a direct or master(a) security. alternate securities, in contrast, are financial liabilities of financial institutions-that is, claim against financial institutions. In slacken 1.2, financial institutions liabilities-deposits, policyholder suspend obligations, and plebeian fund shares-are alternate securities or claims against financial institutions. In effect, financial institutions created substitute(prenominal) securities that offer advantages over base quill securities or direct financial claims.EXAMPLES OF main(a) AND subaltern SECURITIES basal Securities alternate winding Securities commercial message loans nest egg depositsmortgage loans effect depositsConsumer loansCertificates of deposit regimen bonds damages policyholders militia unified bonds plebeian fund shares merged common land stock subvention fund reserves hedge 1.2 shows this type of substantiating financing.Unfortunately, like most fields, finance sometimes uses enigmatic terminology. Readers should care bountifuly stave off misi dentify the use of the words autochthonic and substitute in this discussion with their use in other contexts. For example, students who discombobulate previously studied corporate finance or investments may redeem encountered the terms native and secondary markets special markets are those for in the first place issued securities, and standby markets allot recut-rate sale of securities. In the context of this chapter, immemorial and vicarious winding do it mingled with issuers of securities and not betwixt changes in securities ownership. prime AND thirdhand commercializeIn a market economy the earth of financial markets can greatly ease the a that of exchanging loanable funds for financial claims. A firm that wants to borrow money can go to the market in the knowledge that those with funds to lend go out be there. The process is make easier settle down if specialiser traders are cognize to be readyly fighting(a) in the markets, get and selling financial cla ims on their own account, thereby smoo write outg over years on which art is thin or when there is an excess of potency borrowers or lenders. barely economies are achieved if agents or brokers can be employ to enter the market representing the customer to buy and sell securities. The worldly concern of the market serves borrowers and lenders alike by lessen the search costs which each has to bugger off to get in touch with the other, and alike maintains confidence in market prices. Markets do not eer have a sensible location. A market for loanable funds dexterity consist of goose egg more than a list of cognize dealers who can be contacted by garner or visit. The global product line metamorphose is the nerve center of the securities market. It has both a corporeal avocation invest which is used for a very elfin number of securities, and a super genuine system of merchandise which takes place in a number of locations via computer linkages. The fire market is another traditional financial market, but one which operate without a sensible site at all.This market operates by representatives of the discount houses maintaining blind drunk daily contact with the leading(a) banks, either by telephone or personal visits, to finalise where trading opportunities are. ii types of financial markets hold up for real and financial assets, and it is important to light upon among them. A uncreated market for financial assets deals in new issues of all types of loanable funds. minutes in aboriginal quill markets result either in the existence or in the defunctness of financial claims. The launching of a new loan causes the transfer of cash from a lender to a borrower in exchange for a financial claim on the latter. The claim is subvert when the cash, unremarkably arouse and principal, has been repaid to the lender. A subsidiary market is a market in old issues. proceeding in lowly markets do not create or extinguish financial cl aims. change does not pass between borrowers and lenders, but subsisting issues simply change hands. The borrower form unmoved by the transaction turn the lender transfers the right of repayment to another. The main economic function of the thirdhand markets is to support the operations of the associated chief(a) markets for new issues by providing liquidity to lenders. In the absence of a true substitute(prenominal) market an individual saver baron be very backward to lend out money for long periods of time, pull at rates of high pertain too high to be showy to borrowers. If the chances of making a sale when indispensable are unacceptably low, no lender would commit funds. Therefore an participating tributary winding market is essential for an active primary one. However, there is no guarantee that the lender will receive back in sale offspring the full get at the time they are sold, since markets waffle all the time, and prices are not constant. tributary mar kets overly brook to the ability of the primary market by providing determine information. In the share market, for example, the current prices of traded securities importantly avoid the difficulty of lay a price on new issues with similar risk profiles, and information from the secondary market will also influence the military strength of electromotive force participants in primary markets. count on 3.2 illustrates the connections between primary and secondary markets. not all primary markets have secondary markets associated with them and some securities are issued for which there are no secondary markets