Intermediated market

Intermediated market

By serving as a link between buyers and sellers, intermediated marketplaces are essential to the global economy. Intermediaries like agents, brokers, or financial institutions enable transactions between parties with particular requirements and resources in these marketplaces. This intermediary function offers value by offering experience, market information, and access to a more extensive network of potential buyers or sellers. Intermediaries lower transaction costs and boost market liquidity through efficient supply and demand matching. 

What is an intermediate market? 

A market in which financial intermediaries, like investment firms, banks, and insurance companies, assist in purchasing and selling financial assets between investors is referred to as an intermediated market.

Understanding an intermediated market 

Take the example of financial markets where intermediated markets are present. Between borrowers and lenders, banks and other financial organisations operate as brokers. They collect deposits from depositors and offer loans to both people and corporations. Banks promote economic expansion and development by collecting savers’ money and delivering it to borrowers. Additionally, they provide financial services, including payment processing, investment guidance, and risk management. 

A downside of an intermediary market is the possibility of less transparency. Information passes via many persons or organisations in an intermediated market before the final buyer or vendor is reached. This can result in a lack of transparency and, as a result, chances for manipulation or fraud. Participants may need to have an explicit knowledge of market circumstances or the actual worth of the items or services being exchanged if they have direct access to information. This can lead to inefficient pricing and a lack of trust in the markets, which can impede its general operation. 

Overall, intermediary markets are essential tools for promoting trade across different industries. They increase market effectiveness, offer information and skills, and promote economic expansion. When buyers and sellers are connected, intermediaries facilitate seamless and effective transactions. 

Types of intermediated market 

There are several intermediated markets, each catering to different industries and sectors. 

  • Financial market 

This market makes trading financial items easier, including commodities, stocks, bonds, and currencies. Financial intermediaries that connect investors with businesses wishing to raise funds include stock exchanges, banks, and investment firms. They offer the infrastructure and knowledge required to guarantee seamless transactions and reduce risks. 

  • Real estate market 

Real estate intermediaries, such as agents and brokers, connect purchasers and sellers in the real estate market. These middlemen help in deal-making, deal negotiation, and navigating the legal system. They are well-versed in the regional real estate market and can offer insightful advice to buyers and sellers. 

  • Retail market 

Another type of an intermediated market is the retail sector. Retailers serve as a middleman between producers or wholesalers and end consumers. They buy products in large quantities from vendors and then sell them to individual customers. By offering convenience, variety, and customer service, retailers increase value. They are also responsible for handling logistics and keeping inventories. 

Additionally, there are other types of intermediated markets, such as the agricultural market, where intermediaries like cooperatives or agricultural brokers connect farmers with buyers; the energy market, where intermediaries facilitate the trading of energy products like oil, gas, or electricity; and the healthcare market, where intermediaries like health insurers or pharmacy benefit managers play a role in connecting patients with healthcare providers.

Working of an intermediated market 

The intermediated market facilitates financial transactions through intermediaries like brokers or agents. These middlemen serve as a link between purchasers and sellers, helping to meet their requirements and facilitating the efficient completion of transactions.  

Buyers approach intermediaries with their needs, and intermediaries utilise their connections and industry knowledge to locate suppliers who can meet those needs. The intermediaries play a significant role in ensuring that both parties are informed, negotiating fair terms, and managing the transaction process. This market structure makes transactions quick and straightforward, giving buyers and sellers convenience and knowledge. 

Example of intermediated market 

The stock market is a typical example of an intermediated market. Brokers serve as intermediaries in this situation between investors looking to purchase or sell equities. They offer services, including trade execution, investment guidance, and portfolio management. In order to maintain fair and transparent trading that safeguards the interests of sellers as well as buyers, the stock market depends on intermediaries. 

The real estate market is another example of an intermediated market. The job of real estate agents in bringing together purchasers and sellers of properties is crucial. They offer services, including marketing, negotiating, and property appraisal. Real estate agents support sellers in connecting with potential buyers and aid buyers in finding appropriate properties. The efficiency and efficacy of real estate deals are aided by their skill and understanding of the local market. 

Frequently Asked Questions

The main benefit of using financial intermediaries is establishing a central marketplace where transactions may be done. Additionally, it offers the client cost-effectiveness and risk minimisation. 

There are various advantages to using intermediated markets.  

  • Intermediaries offer experience and understanding of financial goods and markets, assisting investors in making educated decisions.  
  • They also provide easy access to diverse investment opportunities, helping investors diversify their portfolios.  
  • Further, by actively purchasing and selling assets, intermediaries give liquidity to the market, allowing investors to readily enter and exit positions.  
  • By pooling resources and distributing them among an extensive amount of investors, intermediaries assist in lowering transaction costs.  
  • Intermediated markets enhance financial system efficiency, transparency, and stability. 

One downside of an intermediated market is the possibility of higher expenses. When intermediaries, such as brokers or agents, are engaged in purchasing and selling, they often collect fees or charges for their services. These charges can build up and cut into buyers’ and sellers’ earnings. Further, intermediaries may impose extra charges such as transportation or storage fees. These fees might make the transaction more costly and less appealing to market participants. 

An auction market is one in which sellers and buyers place competing bids at the same time. A stock’s trading price indicates the highest price a buyer is ready to fork over and the lowest price a seller is willing to take. The auction market’s primary objective is to connect buyers and sellers; most large company equity shares in the United States are sold through regulated auction markets. The New York Stock Exchange, or NYSE, is the largest auction market. 

Related Terms

    Read the Latest Market Journal

    Introduction to unit trust

    Published on Apr 23, 2024 25 

    In the diverse and complex world of investing, unit trusts stand out as a popular...

    Back in Business: The Return of IPOs & Top Traded Counters in March 2024

    Published on Apr 17, 2024 482 

    Start trading on POEMS! Open a free account here! At a glance: Major indices continue...

    Weekly Updates 15/4/24 – 19/4/24

    Published on Apr 15, 2024 72 

    This weekly update is designed to help you stay informed and relate economic and company...

    From $50 to $100: Unveiling the Impact of Inflation

    Published on Apr 12, 2024 155 

    In recent years, inflation has become a hot topic, evoking strong emotions as the cost...

    Japan’s Economic Resurgence: Unveiling the Tailwinds Behind Nikkei 225’s Record Leap

    Published on Apr 11, 2024 87 

    Source: eSignal, Intercontinental Exchange, Inc. In the heart of Japan’s economic landscape, the Nikkei 225...

    Weekly Updates 8/4/24 – 12/4/24

    Published on Apr 8, 2024 109 

      This weekly update is designed to help you stay informed and relate economic and...

    What Makes Forex Trading Attractive?

    Published on Apr 2, 2024 191 

    In a world where the click of a button can send goods across oceans and...

    Weekly Updates 1/4/24 – 5/4/24

    Published on Apr 1, 2024 99 

    This weekly update is designed to help you stay informed and relate economic and company...

    Contact us to Open an Account

    Need Assistance? Share your Details and we’ll get back to you

    IMPORTANT INFORMATION

    This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

    An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.  

    Investments are subject to investment risks including the possible loss of the principal amount invested. The purchase of a unit in a fund is not the same as placing your money on deposit with a bank or deposit-taking company. There is no guarantee as to the amount of capital invested or return received. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved.  

    Where applicable, fund(s) may invest in financial derivatives and/or participate in securities lending and repurchase transactions for the purpose of hedging and/or efficient portfolio management, subject to the relevant regulatory requirements. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products.  

    The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <www.phillipfunds.com> for more information in relation to the dividend distributions.  

    The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.  

    The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. Any member of the PhillipCapital Group of Companies may have acted upon or used the information, analyses and opinions herein before they have been published. 

    This advertisement has not been reviewed by the Monetary Authority of Singapore.  

     

    Phillip Capital Management (S) Ltd (Co. Reg. No. 199905233W)  
    250 North Bridge Road #06-00, Raffles City Tower ,Singapore 179101 
    Tel: (65) 6230 8133 Fax: (65) 65383066 www.phillipfunds.com