Introduction
The United States financial system consists of three main types of financial institutions, and each of them fulfills an important role. In most cases, depositary institutions are commercial banks or credit unions, which provide their clients with services enabling loans, deposits, and fulfillment of some other financial services, which is the primary purpose of these institutions. The role that depositary facilities play is connected to their mechanism of functioning – they obtain money as deposits and provide them to people as loans, therefore filling the gap between the two parties (Brigham & Ehrhardt, 2017).
Essence
These institutions engage in capital market activities by providing financial services and lending capital to companies. Additionally, they provide support for money services and spot (cash) markets by upkeeping financial systems and enabling the transfer of funds between parties. Contractual companies can be divided into these main types – pension funds and insurance companies, which help the United States economy by providing people with insurance policies and helping them save money through investments made by pension funds. These institutions engage in securities trade, by investing in stock through capital markets, working with Forex and Interbank, and primary markets. Their main objective is to transform assets into long-term securities.
Investment institutions consist of investment companies, brokerages, financial companies, and investment funds. Their primary role is in either investing money in stock or obtaining them by selling stocks and bonds (“Glossary of stock market terms,” n.d.). These institutions intersect with various types of markets, more specifically Forex and Interbank, by engaging in stock trading. Through primary markets, they are able to participate in security insurance, while in secondary markets (inclusive of OTC), they can purchase storks. Additionally, through capital markets, they are able to trade securities.
References
Brigham, E.F., & Ehrhardt, M. C. (2017). Financial management theory and practice (15th ed.). Boston, MA: Cengage.
Glossary of stock market terms. (n.d.). Web.