DOMESTIC FINANCIAL MARKETS

This research reviews developments in the domestic financial markets of the United States over the December 1992December 1993 period. Developments are reviewed in the contexts of commercial bank initiatives in the financial markets, futures selling, short selling, and stock and bond activity.

Competition from mutual fund operators for the deposit accounts relied on by commercial banks has caused an increasing number of commercial banks to become active traders in financial securities. The preferred trading approach for commercial banks is the management of mutual funds. Since the deregulation of the American banking and finance sector in 1980, the assets of mutual funds managed by commercial banks has risen to well in excess of $200 billion. The increase in mutual fund assets managed by commercial banks has increased by 17.75 percent in 1993. Throughout the development of commercial bank management of mutual funds, the primary emphasis has been on money market instruments. In 1993, money market funds account for approximately 65 percent of the total assets of the mutual funds managed by commercial banks. Taxable bonds comprise the second largest asset group in 1993, followed in turn by equity stocks, and taxexempt bonds.

A consortium led by the Chicago Mercantile Exchange established Globex for the purpose of developing a roundtheclock futures trading system.

. . .
e creation of the SEC, shortselling came under careful scrutiny. As a result, certain forms of shortselling were prohibited, and the SEC was provided with the authority to control that which was permitted. Currently, the major requirements related to shortsales are as follows: 1. The proceeds of a shortsale must be held in escrow, until the sale is covered. 2. Shortsellers must post a margin equal to 50 percent of the sale. If the price of the stock in which a short position is taken rises before the transaction is covered, the shortseller must post additional margin. 3. Shortsellers must compensate the owner of borrowed stock for any dividends paid or stock splits declared before the shortsale is covered. 4. Shortpositions cannot be established when the price of a stock is declining. They may only be established on an uptick. 5. The extent of short holdings in individual stocks and in the market must be reported by exchanges monthly. Supporters of the practice of shortselling hold that it increases the efficiency of the market. Whether or not this assessment is true, it is true that the larger the short position in the market, the greater is the pessimism in the market, and vice
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Some common words found in the essay are:
Short Selling, Chicago Mercantile, Initiatives Competition, Bond Activity, Jones Index, United December, International Investment, Standard Poor's, Mercantile Exchange, Barra Index, equity stocks, equity stock, commercial banks, mutual funds, investment houses, major investment houses, financial markets, major investment, price stock, december 1993, futures trading, roundtheclock futures trading, positions selected major, selected major investment, equity stock market,
Approximate Word count = 2313
Approximate Pages = 9 (250 words per page)

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