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15. Market

Lead-in:

1. goods and services – товари і послуги

2. spot market – ринок наявного товару, “спот”

3. futures market –ф’ючерсьний ринок

4. commodity market – товарна біржа, ринок товарів

5. foreign exchange market – валютна біржа

6. Exchange Rate Mechanism – механізм валютного курсу

  1. exchange rate fluctuations – коливання валютного курсу

A market is gathering of people for buying, selling and exchanging goods or services. So in economics it is the network of dealings between buyers and sellers. These dealings may be regular and organized, spasmodic and unsystematic.

According to the character of concluded contracts, markets can be divided into 2 types: spot markets and futures markets. The spot market is a place where goods, currency and securities are available for immediate delivery.

The futures market is a place where goods, currency and securities are available for delivery at a future date for a price fixed in advance.

There are 3 types of markets according to their function: commodity markets/exchanges, stock markets/exchanges; foreign exchange markets.

Commodity markets/exchanges are the places where raw materials and some manufactured goods are bought and sold for immediate or future delivery.

Stock markets/exchanges are the markets where stocks and shares are bought and sold under fixed rules, but at prices controlled by supply and demand. Supply – the behaviour of sellers and demand – the behaviour of buyers are essential features of the maket. The main idea of stock exchanges is to enable public companies, the state and local authorities to attract capital by way of selling securities to investors. Stock markets are secondary markets by their nature. Secondary markets trade in existing securities, as opposed to new issues traded on a primary market. New issues make up an insignificant part of the market turnover. The development of the secondary market provides for liquidity and reducing the risks of investments.

Foreign exchange markets are the markets where foreign currencies are traded. Market makers acting on foreign exchange markets are either dealers, firms or foreign-exchange brokers.

Such markets are not entirely free as free markets where prices are allowed to rise and fall according to supply and demand, without prices being fixed by governments. Such a situation is called “clean floating”. Though many countries removed all exchange controls, i.e. a set of restrictions imposed by a government on buying and selling foreign currencies, the Central Banks of various countries influence to some extent the market situations, influence the Exchange Rate Mechanism. The Exchange Rate Mechanism it is the scheme used by countries in the European Monetary System to keep the relative values of the currencies within agreed limits. The aim of the Exchange Rate Mechanism is to stabilise exchange rate fluctuations. Such currencies are called “currency snakes” and the rate of exchange is called “a managed currency”.

So the market reflects any change in the economy. It is sensitive to interest rates, inflation, employment and political events in any country.

Questions for comprehension check-up and discussion:

  1. What is a market?

  2. Into how many types can markets be divided according to the character of concluded contracts?

  3. How many types of markets are there according to their function?

  4. What is a commodity market?

  5. What is a stock market?

  6. What is traded on foreign exchange markets?

  7. What is the aim of the Exchange Rate Mechanism?