Earlier we provided the general role of financial markets in the financial system. In this section we discuss several ways of classifying financial markets.

We can divide the financial market of a country into internal market and external market. Internal market which we also call national market is made up of two parts namely domestic market and foreign market. A domestic market is a market where issuers issue securities domiciled in a country and where investors trade those securities. For example, from the perspective of the United States, Microsoft U.S. Securities issued by corporations trade in the domestic market.

A foreign market is a market where securities of issuers not domiciled in a country are sold and traded. For example, from a U.S. perspective, securities issued by Toyota Motor Corporation trade in foreign markets. Our refer to the foreign market in the United States as the Yankee market.

The regulatory authority where the security is issued enforces the rules on the issuance of foreign securities. For example non-U.S. Corporations seeking to issue securities in the United States must comply with US securities laws. Non-Japanese corporations wishing to sell securities in Japan must comply with Japanese securities law and regulations enacted by the Japanese Ministry of Finance.

Another sector of the country's financial market is the external market. It is a market where securities are traded with the following two distinctive features:

1. At issue, securities are offered simultaneously to investors in several countries.

2. Securities issued outside the jurisdiction of any one country. We refer to external markets as international markets, offshore markets and Euromarkets.

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