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The financal makers provide a marketplace through which funds are chan-neled from sectors with idle cash (lenders) to cash-short sectors(borrowers), and the types of financing arranged on these markets are divided in terms of intermediaries into indirect and direct financing. Indirect financing means a form of transaction in which a financial institution acquires a primary secure-ty (IOUs and notes,ect.) from a borrower with a fund raised by issuing an in-direct security(certificates of deposit and insurance policies,etc.). In direct financing, a borrower raises funds by issuing a primary security (equity and debt securities, etc) to lenders though a market intermediary. The market place on which direct financing is arranged is the securities market, which is divided into an issue market(where securities are issued and distributed) and a trading market (where securities are bought and sold).
Generally, the term ”security” refers to instruments that give their legal holders the rights to money or other property. They are designed to facilitate the assignment of such rights and have the characteristic of combining rights and certificates. More specifically, they are issued in various form, such as stocks and bonds issued by business corporations; notes, checks, and bills of lading ;government securities issued by national governments; and municipal bonds issued by local public bodies. Of these, securities traded in the securities markets are balled “securities under the Financial Instruments and Exchange Act(FIEA),” as defined in paragraphs 1 and 2, Article 2,of that law. Paragraph 1 defines securities whose interests are represented by securities or certificates that are physically issued as listed in the Securities and Exchange Law, new types of securities, such as mortgage securities and securities representing financial options contracts, have been included in the new definition. Item 21 of the paragraph provided that securities and certificates so designated by government ordinance, including bonds issued by educational institutions, shall be deemed to be securities under the law.
Paragraph 2 of Article 2 sets forth the definition of deemed securities. First, interests represented by securities that are listed in the preceding paragraph are deemed to be securities by themselves in cases where no physical certificates are issued. For example, interests represented by bonds or stocks held under a book-entry transfer system are deemed equivalent of those securities listed in Paragraph 1. The latter part of the paragraph then goes on to define deemed securities as interests other than those represented by securities or certificates. The scope of the definition has been substantially widened compared with that of the former law, and specifically, there are comprehensive provisions in Item 5 of the paragraph for FIFA to be applicable to various types of collective investment vestment ordinance, including claims on loans o educational institutions, are provided for as deemed securities. In addition to securities, FIEA applies to derivative transactions in domestic financial instrument and over-the-counter markets and foreign markets.
