What Capital Markets Can Lawyers Work In? Core Information for those Considering Law Training Contracts
Capital markets can be ‘real world’ or virtual. In all capital markets, you will find issuers – those who are providing shares of their company for sale – and underwriters, the investment banks that provide capital. Remember that companies can receive financing through equity (selling shares) or debt financing (borrowing money from a bank).
The equity capital markets are perhaps the best known. These markets are where private companies become public, through an IPO (initial public offering) and where the public can then buy shares. The most influential and well-known stock exchanges are the NYSE (New York stock exchange), the NASDAQ (also a US exchange) , the Shanghai Stock Exchange, Euronext, Japan Exchange Group, Hong Kong Stock Exchange, Shenzhen Stock Exchange, and the London Stock Exchange (LSE). Note the rate at which China is beginning to exert economic power, and the representation of Asia throughout the list. In an equity capital market (better known as a stock market) the price of shares is determined by the public interest in a share.
Debt capital markets allow borrowers to sell bonds to investors. These bonds can be traded by investors. The bond is an agreement whereby the investor agrees to finance the company to a set amount, and the company agrees to pay back the investor with interest.
Structured finance is another area that you should be aware of. Structured finance provides large financial institutions or companies with special products that suit their needs – collateralized debt obligations, synthetic financial instruments, and collateralized bond obligations are some examples. Note that traditional lenders do not provide structured financing. Structured financial products cannot be transferred from one party to another.
The last area to know about is derivatives. A derivative is a financial contract of which the value is set by an underlying asset or group of assets. Derivatives can trade both on exchanges and over the counter (i.e. in private).