1.1.3 Financial Intermediaries

This topic describes the financial intermediaries.

Having designed the instrument the issuer should ensure that these financial assets reach the ultimate investor in order to garner the required amount. When the borrower of funds approaches the financial market to raise funds, the mere issue of securities may not suffice. Adequate information on the issue, issuer, and the security should be passed on the supplier of funds for the exchange of funds to take place. To serve this purpose, financial intermediaries came into existence. Major changes have been witnessed in the type of issuers and investors participating in the market.

Financial innovations, technological up-gradations and most importantly changing regulatory mechanisms made the process of raising funds from the market place a complex task. Investors’ preferences for financial assets have also changed. Designing instruments that catch the investors’ attention has now become a specialized service. Likewise, proper expertise is also necessary for establishing transactions in the financial markets. The large volume of transactions taking place in the markets will have to be recorded promptly and accurately.

Some of the important intermediaries operating in the financial markets include investment bankers, underwriters, stock exchanges, registrars, depositories, custodians, portfolio managers, mutual funds, financial advertisers, financial consultants, primary dealers, secondary dealers, self-regulatory organizations, etc. The role of these intermediaries is summarized in the following table.