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Explain how financial markets work in the United States.

The world has a complex financial market. As the largest market in the world, the United States is a
major piece of the complexity. The internal financial system in the United States uses various banking
and financial institutes to collect money to invest in businesses and other assets. The largest entity is
the commercial bank which most if not all people and businesses use to conduct personal and
operational finances. Non-banking institutes focus on business activities such as financial services,
insurance, leasing equipment, investment activities, and other activities (pg 21). These entities take
savings from individuals and companies and invest in other companies. These activities are done in
the securities market, which exchanges negotiable instruments in the form of stocks and debt. Within
the securities market there is a primary market used for initial transactions where the lender received
actual payment. Then there is a secondary market where debts and stocks are transferred to another

Financial Markets is the system in which individuals and business lend and borrow
money. Borrowers expand opportunities usually businesses and lenders earn a return on their
investment (pg20). The United States uses a system with various types of financial institutes.
All of these institutes rely on the intake of money in order to invest in other opportunities or
businesses or provide protection and insurance when needed. The largest financial entities are
commercial banks that are used by the majority, if not all people throughout the country
(pg21). Commercial banks operate throughout the world, but unlike other countries the
United States prohibits banks from owning industrial corporations (pg21). The United States
also has non-banking institutes that focus on financial servicing for businesses. These
organizations focus on various financial programs, insurance, leasing for equipment, and
other services (pg22). Investment banks assist businesses and government entities raise
money and provide advice through specialized services. Insurance companies are a
specialized financial institute in that they hold premiums as a source to pay for claims or
losses (pg23). There are also numerous investment companies that take savings from
individuals and invest the money into other companies (Pg23). Some of these types of
investment companies are mutual funds, hedge funds, and private equity firms. These types
of firms vary based on the types of investors and investments used. Mutual funds are open to
pretty much anyone and focus on a specific diversified group of assets. Hedge funds are run
similar to mutual funds but are more risky, have less regulation, but usually provide a larger

yield. Private equity firms are focused on the wealthier individuals and organizations
investing in private companies when they are first founded (pg24).
All of the above to include people, businesses, and government use the securities market
to exchange negotiable instruments in the form of stocks and debt. Any new instrument will
first be negotiated in the primary market. This is the first step in raising money to assist in
paying for their businesses operations. The secondary market is uses to transfer securities to
another investor.

Identify processes the organization uses to comply with SEC regulations.