Financial markets
Introduction
in The UK financial system (fifth edition)
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This chapter looks at the main financial markets making up the UK financial system. It considers some general issues relating to the nature and role of financial markets, including types of trading system and types of trading activity. The chapter discusses the nature of an efficient financial market and examines the behavioural theory of finance. The emergence of London as an international financial centre can be explained with reference to a number of factors. The first is the time zone factor, with London occupying a position mid-way between the western and eastern time zones, which allows financial trading to take place 24 hours a day, with business switching between the major financial centres. The chapter outlines the role of markets in the completion of deals. It also considers the opportunities offered by financial markets to engage in three specialist activities, namely hedging, speculation and arbitrage.

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