The Growth of Financial Markets and The Role of Traders
The Growth of Financial Markets and The Role of Traders
As seen in various events in history, there are instances wherein the actions taken by individual traders have greatly damaged the firms that they work for. In line with this, what happened to these individual financial institutions may also endanger the stability and operations of financial markets around the world. This chapter first provides a brief history of global financial markets, emphasizing the impact that individual traders have on firms and the impact of these firms in markets. Secondly, the chapter presents the role of investment banks in financial markets in absorbing credit risks, serving as intermediaries for the diversification of such risks, and proprietary trading. Third, the chapter describes the work of traders through three categories: trading on behalf of customers, market-making, and proprietary trading.
Keywords: financial markets, individual traders, risk absorption, risk intermediary, proprietary trading, market-making
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