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The Structure and Regulation of Financial Markets$
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Peter D. Spencer

Print publication date: 2000

Print ISBN-13: 9780198776093

Published to Oxford Scholarship Online: October 2011

DOI: 10.1093/acprof:oso/9780198776093.001.0001

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Capital Market Microstructure and Regulation

Capital Market Microstructure and Regulation

(p.75) 4 Capital Market Microstructure and Regulation
The Structure and Regulation of Financial Markets

Peter d. Spencer

Oxford University Press

Capital markets are special because they organize trade invariable price securities like queries and bonds, and these are primary securities that do not involve the interference of a financial intermediary like a bank. Though these markets depend mainly upon market conditions, bond and equity contracts and the markets they trade in are actually easier to analyse than bank-intermediated instruments like deposits. Capital markets perform numerous important functions and these markets allow agents to insure them against unfavourable events that may affect the security prices. This chapter starts with a survey of the main types of capital market found in the modern economy. The Copeland and Galai model is then presented, which is commonly used to trade bonds and equities in the Anglo-Saxon markets. The chapter is also based on the assumption of exogenous information, which means that insiders are endowed with exclusive information for nothing, while research by interested outsiders is unlikely to uncover the information.

Keywords:   capital markets, market conditions, Copeland, galai, exogenous model

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