CHAPTER - I
INTRODUCTION
A capital
market is a market for securities (debt
or equity), where business enterprises (companies) and governments can
raise long-term funds. It is defined as a market in which money is provided for
periods longer than a year, as the raising of short-term funds takes place on
other markets (e.g., the money
market). The capital market includes the stock market
(equity securities) and the bond
market (debt). Financial regulators, such as the UK's Financial
Services Authority (FSA) or the U.S. Securities and Exchange Commission (SEC),
oversee the capital markets in their designated jurisdictions to ensure that
investors are protected against fraud, among other duties. Capital markets may
be classified as primary
markets and secondary markets. In primary markets, new stock or
bond issues are sold to investors via a mechanism known as underwriting. In
the secondary markets, existing securities are sold and bought among investors
or traders, usually on a securities exchange, over-the-counter, or elsewhere.
CHAPTER - II
INTERNATIONAL CAPITAL MARKET
International Capital Market is define as “a cluster of closely integrated market which
deals in different types of financial as well as physical assets including
stocks, bonds, and bank deposits denominated in different currencies.
Commodities like Petroleum Gold Silver Platinum Derivatives instrument like
borrowed contracts, futures, options, swaps, real estates, etc.”
International Capital Market is that financial
market or world financial center where shares, bonds, debentures, currencies,
hedge funds, mutual funds and other long term securities are purchased and
sold. International capital market is the group of different country's capital
market. They associate with each other with Internet. They provide the place to
international companies and investors to deal in shares and bonds of different
countries.
After invention of computer and Internet and revolution of financial market in 2010, almost all financial markets are converted in international capital markets. We can give the example of Hong Kong, Singapore and New York world trade centre. International capital market was started with dealing of foreign exchange. After
globalization of financial sector, companies have to take
certificate for dealing in international market. Suppose, Indian company wants
to sell shares in France,
for this, Indian company should take certificate named global depository
receipt (GDR).
International capital market's daily turnover has crossed $ 5 trillion. International capital market is very helpful for reducing the risk of small company because in international market, you can buy different countries company’s shares, debentures and mutual funds. Different countries have different business environment, so if any country is facing loss and due to financial crisis, your investment in that country may suffer losses but you can fulfill this loss from other country's investment. So, overall risk will be reduced by this technique.
CHAPTER - III
Factor
responsible for growth of International Capital Market
i.
We are in the Era of
floating exchange rate. Before the current floating rate system there was a
system of gold parity and fixed exchange rate system. Floating exchange rate
system is one of the most important reasons for growth of International Capital
Market.
ii.
Due to growth of
Globalisation, Privatisation and Libralisation and integration of world economy
there has been tremendous growth of International Capital Market.
iii.
Almost all nations have
lifted controls from capital flow which is one of the factors for growth of
ICM.
iv.
Political stability is
important return for the growth of ICM.
v.
Advancement in
communication Technology and Transports.
vi.
The cold war between
sovient union and US is one of the reasons for the growth of ICM.
vii.
Security, Liquidity and
Return.
viii.
Integration with Global
Financial Market.
ix.
Reduction in price
difference.
x.
Growth in international
trade due to efforts of GATT and WIO.
xi.
There are also two more
different factors responsible for the growth of ICM.
a) Pull Factor
b) Push Factor
a)
Pull Factor:-
A pull Factor attract investor to make investment in particular
country for verity of reasons.
b)
Push Factor:-
A push factor forces the
investor to leave his country and to search for alternative, destination of
verity of reasons.
Feature of International Capital Market
i.
In International Capital
Market every country are Closely Integrated with each other.
ii.
International Capital
Market usually deals in Huge Volume.
iii.
In ICM there are number of Participants.
iv.
Biggest financial
intermediately which takes resources and deploy resources.
v.
Foreign Exchange Market
is an important part of the ICM.
vi.
ICM comprises of
International Bond Market and Euro Bond.
Role of International Capital Market
Association (ICMA) for International Capital Market
i.
Development
and maintenance of high standard of market practices.
ii.
To formulate
and implement appropriate regulation.
iii.
Educating
market participants and others through training and research.
iv.
Facilitating
communication and establishing information forum.
v.
Promoting
good standards of transparency fair play, accountability between the members.
vi.
Help member
in legal cost and promotion of self regulation.
vii.
Help market
to develop and operate efficiently.
viii.
Setting
market practices, standards and promotion of market related initiative.
REGULATORY
BODIES IN INTERNATIONAL CAPITAL MARKETS
International primary market association (IPMA)
was formed as an independent trade association in 1934 for leading underwriters
of international issues of debt & equity. IPMA was the main organization
dealing with new issue procedure in euro markets. IPMA original role was
harmonization & the establishment of best practices in the primary market.
IPMA was neither an exchange nor a regulator. IPMA’s rules take the form of
recommendation based on general agreement of the measure underwriters. Members
are free to disapply them, but otherwise they are presumed. Agreement is
secured by philosophy of consensus. IPMA had no power to sanction. IPMA was
merged with international securities market association (ISMA) in July, 2005.
The merger created a new body known as international capital market association
(ICMA).
ICMA is a trade association & a
self-regulatory body. ICMA’s members include banks, financial institutions,
underwriters, issue managers, institutional investors & borrowers.
ICMA is a representative body for all capital
market constituents in European markets.
International Primary Market Association
The international primary market association
(IPMA) is the organization that represents the lead managers of equity and debt
securities in the international capital market. The prime objective of the
association is to achieve a harmonized primary capital market in Europe. Providing an appropriate level of protection to
the investors of Europe is another objective
of the association.
The
association is based in Europe and takes care of the primary capital market in Europe. The working document that is presented by the
association takes care of the instructions given by CESR's "level 2
advices. But in some cases the specifications given by CESR are not followed.
The working document given by the international primary market association
considers those issues that may come critical to the operation of European
capital market.
The comments made by the association working document
reflect the views of the association's members. The members of international
primary market association are the major banks and financial institutions of Europe that are active in the capital market. The member
institutions have expressed their concerns with the association as issuers and
investors.
There are various activities of international primary market association. Some of them are listing of new stock securities, listing of new debt securities and also granting limited temporary exemptions for existing debt securities. The conditions for temporary exemptions of the securities specified by the directive are - the issuer can have only debt admitted to trading on the regulated market, the issuer actually is only exempt from half-yearly disclosure but not from annual or interim disclosure and that the exemption is applicable only for seven years.
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Background of
International Primary market Association
Since
its launch in 1985, the IPMA Handbook has grown from a few short pages
covering the issuance of straight Eurobonds to a comprehensive document
covering a broad range of international securities. It is very much a “live
document”, continuously responding to market developments when guidance or
standardisation is required. The most recent additions to the IPMA Handbook
can be found here.
The International Primary Market Association (IPMA) merged with the International Securities Market Association (ISMA) in July 2005, creating the International Capital Market Association (ICMA).
However,
continues to be referred to as the "IPMA” pending any consolidation into
a single handbook of the rules and recommendations of the former IPMA and
ISMA. Similarly, the recommendations, standard documentation, guidance notes,
etc., contained in the IPMA Handbook continue to be referred as “IPMA”
recommendations, standard documentation, guidance notes, etc. Generally, the
IPMA Handbook is intended to apply to cross-border issues of securities
lead-managed by ICMA members, who are presumed (except as stated to the
contrary in the relevant syndicate invitation) to be
applying relevant
IPMA
Recommendations (further detail is set out within the IPMA). Oversight of the
IPMA Handbook rests with ICMA’s Executive committee
acting on the advice of the ICMA Primary market practices sub-committee and
the ICMA Legal and documentation sub-committee.
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International
Capital Market
Association
Over the past 40 years, ICMA has made a significant contribution
to the development of the international capital market. Since the beginning of
the Euromarkets, ICMA has facilitated the interaction between issuers, lead
managers, dealers and investors for the benefit of an efficient and
well-functioning security market.
From its beginning as a modest offshore market, the international
capital market has grown into a broad and deep market of around €10 trillion
serving the needs of governments, supranational and corporate from all over the
world. From year to year, decade to decade, the market has expanded dynamically
across all geographical and product areas, helping the free movement of
capital across borders and the integration of economies, removing obstacles and building bridges linking the different national markets together, and enhancing structural reform and monetary integration.
capital across borders and the integration of economies, removing obstacles and building bridges linking the different national markets together, and enhancing structural reform and monetary integration.
ICMA in its activities was very often the frontrunner in creating
the framework of cross-border issuing, trading and investing, and has
constantly helped to build the relationship amongst all market participants. As
a trade association, ICMA has initiated numerous sets of standard practices to
help develop efficient and well-functioning markets, and through its research
and educational activities as well as organisation, has increased the links
between institutions from all over the world.
ICMA has never understood itself as an advocacy or lobbying
organisation, but as an association with the objective of finding practical
solutions in the steadily changing political and economic financial framework.
ICMA is and was always a strong voice in the promotion of free capital flows
across borders and all other efforts on the long road to integrated capital and
financial markets. In this effort, ICMA was a partner of regulatory and other
governmental/monetary institutions helping
them in the achievement of very ambitious objectives. Promoting “best practices”
and standards, contributing to education, helping supervisory authorities and
furthering the links between its members, was and is ICMA’s mission.
For the benefit of all market participants, ICMA concentrates on “market
questions and solutions”, not on the self-interests of any particular
segment of financial institutions. It is in this spirit that ICMA developed a
commercial activity, TRAX, which serves the market extremely well in data
provision, until the activity was put into the professional hands of Euroclear,
one of the market’s most important infrastructure providers. The dynamic
development of the international capital market and accelerated globalisation
has led to evermore complex markets with many new asset classes,
which pose
market
related, legal and practical challenges to market participants as well as
supervisory and political authorities. The international market has therefore,
on the one hand, seen many new trade associations active in particular segments
of the market and, on the other hand, seen some consolidation among
associations in other segments. In debt capital markets, ICMA continues to play
a major role, particularly due to its unmatched geographical and institutional
diversity. As a cross-border association, ICMA sponsors and brings together
sell and buy side, works on the improvement of the legal framework and continues to see its mission to service
the market as a whole.
the market as a whole.
The events of the last 12 months have brought to light severe
deficiencies in many areas of the capital market (documentary, legal, market
practices etc), which compels ICMA to increase its efforts in order to help
heal the damage done in what has to be considered a major market failure with
all its economic and political consequences.
ICMA has and will continue to operate on a consensual basis in
respect of regional, national or institutional diversity. ICMA is convinced
that it is only cooperation which will allow us to continue to build the
international markets and create a better infrastructure for the distribution
of capital.
What the
International Capital Market Association does?
ICMA’s mission is to make sure
that the international capital market works as efficiently as possible and to
promote best market practice by: maintaining
• The framework of cross border issuing, trading and investing through development of
internationally accepted standard market practices.
• Liaising closely with governments,
regulators, central banks and stock exchanges, both at national and
international level, to ensure that financial regulation promotes the
efficiency and cost effectiveness of the international capital market.
• Encouraging
networking, flow of information and the organisation of market events.
History of
International Capital Market Association
The growing challenges of
globalisation and consolidation in the banking sector, together with increasing
regulatory activity, led to the formation of the International Capital Market
Association in July 2005 through the merger of ISMA and IPMA, creating an
organisation with a broad franchise across the primary and secondary
International Capital Markets.
The driving force behind the creation of the Eurobond market
was an unfavorable tax regime introduced in the USA in the early 1960s, effectively
forcing international borrowing in US dollars offshore. The first Eurobond is
generally considered to have been an issue by Autostrade in 1963. The
Association was established in 1969 by a group of bond dealers representing
banks and securities firms, as the Association of International Bond Dealers
(AIBD), in response to a settlement crisis which threatened what was then the
new Eurobond market.
In the years that followed, AIBD enacted a series of rules
and recommendations governing market practice, thereby providing the stability
and order essential for the continuing development of the international capital
market. In the 1980s AIBD began to provide data
services
to the market and in 1989 launched the transaction matching, confirmation and
regulatory reporting system, known as TRAX. The International Primary Market
Association (IPMA) was founded in 1984 by major banks to provide sound basic
recommendations for the primary capital market. In 1992 AIBD changed its name
to International Securities Market Association (ISMA). ICMA sold its market
services business, including TRAX, to Euro clear in April 2009.
Regulatory Policy and Market Practice
ICMA provides services for members through its regulatory
policy and market practices activities in Europe and beyond by:
·
setting
standards of good practice for orderly markets, in consultation with members
(which also means membership is seen as a “seal of approval” by their peers,
supervisors and regulators);
·
consulting
members and representing members’ views to other constituencies, notably to
regulators and central banks on cross-border regulatory issues, but also to
other market participants;
·
providing a
pan-European focus;
·
representing
the sell side and buy side together, where they agree, and facilitating
dialogue between them;
·
working in
cooperation with other trade associations, where it is in ICMA’s members’
interests; and
·
Sharing
ICMA’s experience of setting standards of good market practice in Europe with trade associations and self-regulatory organizations
in other parts of the world.
ICMA concentrates on
cross-border, rather than domestic, regulatory and market practice issues
because that is where, as a trade association with a pan-European focus; ICMA
can add most value for its members.
ICMA works as closely as
possible with members through its regulatory policy and market practices committees
(and related working groups) which enable interested members to provide expert
input into ICMA’s regulatory policy and market practices work; and they also
act as a forum for discussion and reaching a consensus on topics of common
interest. The ICMA Regulatory Policy Committee oversees
all ICMA’s regulatory policy and market practices work. It consists of the
government affairs, regulatory and compliance heads in member firms.
ICMA communicates with its
members on regulatory policy and market practices issues through its Regulatory Policy Newsletter, this area of
the website and through seminars and conferences.
Rules and Recommendations
ICMA has issued a series of
rules and recommendations for members to comply with and observe in their
dealings with counterparties around the globe.
ICMA's rules and recommendations for
the secondary market form a reliable framework for trading debt related
securities (both between members as well as between members and other
professional market participants) and for the clearing and settlement of
securities.
The IPMA Handbook is a comprehensive document
covering the issuance of bonds, international equities and continuous
offerings. The Handbook is very much a ‘live document’, continuously responding
to market developments when guidance is required.
ICMA has also been instrumental
in producing standard documentation for the repo market
which can be found in this section of the website. Access to some of the pages
within this section is restricted to ICMA members and other subscribers.
Committees, Councils and Working
Groups on Market Practice and Regulation
Participation in ICMA’s
committees, councils and working groups allows members to provide expert input
and direction in its work. They are valued as forums for discussion and
reaching a consensus on topics of common interest.
Ø Legal
& Documentation Committee
The Legal & Documentation Committee consists of the
heads and senior members of the legal transaction management teams of member
firms active in lead managing syndicated bond issues in Europe.
It is concerned with market practice on documentation, including the ICMA
Primary Market Handbook (IPMA Handbook), and related regulatory issues.
Ø Secondary
Market Working Group
The Secondary Market Working Group comprises market
practitioners in the secondary debt market. Its overall focus is to ensure the
functioning of this market by regular review of ICMA’s rules and market
practice.
Ø Euro
Commercial Paper Committee
The Euro Commercial Paper committee comprises the heads and
senior members of the ECP teams of member banks active in this market sector.
It is concerned with the functioning of the ECP market, including maintenance
of documentation standards, disclosure, the restructuring and revival of the
asset-backed CP market, and regulatory issues affecting the market.
Ø European
Repo Council and Committee
The European Repo Council has been instrumental in
developing standard market practice as the repo market in Europe
has developed since the early 1990s. The European Repo Committee (ERC) is the
governing board of the European Repo Council consisting of 19 market
practitioners drawn from and elected by the European Repo Council. The European
Repo Council and the ERC meet regularly to discuss market developments and make
representations to the European Central Bank, Euroclear, Clearstream, and
national CSDs.
Ø Asset
Management and Investors Council (AMIC)
AMIC represents ICMA’s buy-side members and comprises asset
managers, treasurers of official institutions, and representatives of private
banks and hedge funds. AMIC is a forum for discussion of regulatory affairs,
market trends and specific market practice issues affecting the buy-side, with
working groups set up at the instigation of members to consider specific
products, markets and regulatory initiatives. The Covered Bond Investor Council
is a special interest grouping within AMIC.
Ø ICMA
Euro Debt Market AMTE Council
The ICMA AMTE Council, based in Paris, aims to facilitate the development of
the depth, liquidity, transparency and innovative nature of the euro debt markets
and to be a centre of expertise for government and government guaranteed debt.
Its members include issuers, intermediaries and investors.
Ø Council
and Committee of Reporting Dealers
Currently, some 30 reporting dealers within the overall
membership of ICMA form the Council of Reporting Dealers. The council comprises
the market making community within ICMA and accounts for the majority of
cross-border professional trading. The Committee of Reporting Dealers, comprising
nine individuals drawn from the council members, oversees the actions of the
council.
Ø European
Financial Markets Federation (EFMF)
The European Financial Markets Federation brings together
trade associations across Europe, including Germany,
Italy, Switzerland, the UK
and Russia,
to discuss regulatory and market practices issues in common.
Ø Regulatory
Policy Committee
The Regulatory Policy Committee oversees all
of ICMA’s regulatory policy and market practices work. It consists of the
government affairs, regulatory and compliance heads in member firms; the chairs
of the sub-committees forming part of the market practices committee are also
invited to its meetings. Recently the focus of its work has been the regulatory
response to the international financial crisis; bond market transparency; and
the future of the OTC market.
Ø Primary
Market Practices Committee
The Primary Market Practices Committee consists of the
syndication managers of member firms active in arranging syndicated bond issues
in Europe. The committee is concerned with
market practice in the primary market, including the ICMA Primary Market
Handbook (IPMA Handbook).
Ø Issuer
Forum
The ICMA Issuer Forum aims to gather the main financial
institutions who are debt issuers to discuss areas of marketing practice which
are of common interest to them.
Conclusion
Since the last review of developments in International Capital
Markets, the mature international markets have been dominated by four related
developments: large capital inflows into dollar fixed-income markets; the
continued appreciation of the dollar; a convergence of interest rates to
relatively low levels—and a compression of yield spreads—including in
high-yield corporate and emerging markets; and further advances in the major
equity markets. The background against which these developments occurred was
one of a stable macroeconomic environment, characterized by widespread
convergence to low inflation rates, and in some cases price stability, lingering
disparities in growth rates, and continued fiscal consolidation. Intermittent
periods of market tensions in currency and bond markets were associated with
uncertainty about the sustainability of the appreciated value of the dollar,
monetary policy, progress toward EMU, and the resolution of financial sector
problems in Japan.
Due to International Capital Market countries suffer from
different effects which are,
ü Contagious Effect;
ü
Spillover Effect.
Ø
Contagious
Effect:-
A contagious
effect is a subset category of infectious diseases (or communicable diseases), which
are easily transmitted by physical contact hence when a country suffering with
this effect it will affect the whole world.
Ø
Spillover
Effect:-
In reference to psychology, the spillover effect
is when other people's emotions affect the emotions of those around them.
For example if one is happy, other people's emotions alter as well. An effect
of one person on another is also referred to as crossover effect. (See
also: emotional contagion, partner effects)
In the context of work-life balance,
spillover refers to positive or negative effects of an individual´s working life on
their personal life or family life and vice versa. Examples are work-family enrichment and work-family conflict.
BIBLIOGRAPHY
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