Introduction to Financial Markets
What the domain tests
This domain checks whether you can map Pakistan’s financial system: who issues securities, who invests, which market segment a transaction belongs to, and which body regulates it. Expect questions that separate money-market from capital-market instruments and primary issuance from secondary trading.
Core map
- Financial markets channel savings to issuers. Money market: short-term instruments such as Treasury bills, interbank repo and commercial paper. Capital market: long-term equity and debt, including PSX-listed shares and corporate bonds or sukuk.
- Primary market = new securities sold by the issuer, such as an IPO, rights issue or book building. Secondary market = investors trade existing securities on PSX.
- Key institutions: SECP regulates the securities market; SBP handles monetary policy, banking and the money market; PSX is the equity trading venue; CDC is the depository; NCCPL clears and settles trades.
- Brokers are intermediaries, not issuers. They execute, clear and settle client trades through licensed infrastructure.
Worked example
A textile firm raises Rs 5 billion by selling new shares to institutions and the public. That sale is a primary-market transaction, requiring SECP-approved disclosure and PSX listing. The next day an investor buys 1,000 of those shares on PSX from another investor. That is a secondary-market trade: the issuer receives nothing, price discovery occurs on-exchange, and NCCPL and CDC handle clearing, delivery and settlement. The securities regulator is SECP; SBP is not the securities regulator.
Traps
Confusing SBP with SECP; treating a broker’s trade as new capital for the issuer; mixing money-market instruments with capital-market securities; assuming CDC or NCCPL approves listings.