SR INDEX PAGE NO

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 1 TYPES OF INSTRUEMENTS FROM MONEY 1
MARKET

 2 ROLE OF FIMMDA IN MONEY MARKET 2

 3 ROLE OF RBI IN MONEY MARKET 4

 4 ROLE OF DFHI IN MONEY MARKET 4

 5 ROLE OF STCI IN MONEY MARKET 5

 6 ROLE OF FEDAI IN MONEY MARKET 6

 7 MONEY MARKET STRUCTURE AND 7

DISADVANTAGES
 8 CHARACTERISTICS AND PARTICIPANTS OF 11
DERIVATIVES MARKET
 9 SECUATIZATION OF DEB T 15

 10 SHG AND ITS FUNCTIONS 17

 BIBILOGRAPHY 19

FINANICIAL MARKET ASSIGNMENT

NASREEN ROLL NO 25

M.COM BANKING AND FINANCE

Types of Money Market Instruments:

1. Treasury Bills (T-Bills)

Treasury bills or T- Bills are issued by the Reserve Bank of India on behalf of
the Central Government for raising money. They have short term maturities

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with highest up to one year. Currently, T- Bills are issued with 3 different
maturity periods, which are, 91 days T-Bills, 182 days T- Bills, 1 year T – Bills.

T-Bills are issued at a discount to the face value. At maturity, the investor gets
the face value amount. This difference between the initial value and face value
is the return earned by the investor. They are the safest short term fixed income
investments as they are backed by the Government of India.

2. Commercial Papers

Large companies and businesses issue promissory notes to raise capital to meet 
short term business needs, known as Commercial Papers (CPs). These firms
have a high credit rating, owing to which commercial papers are unsecured,
with company’s credibility acting as security for the financial instrument.

Corporates, primary dealers (PDs) and All-India Financial Institutions (FIs) can
issue CPs.

CPs have a fixed maturity period ranging from 7 days to 270 days. However,
investors can trade this instrument in the secondary market. They offer
relatively higher returns compared to that from treasury bills.

3. Certificates of Deposits (CD)

CDs are financial assets that are issued by banks and financial institutions. They
offer fixed interest rate on the invested amount. The primary difference between
a CD and a Fixed Deposit is that of the value of principal amount that can be
invested. The former is issued for large sums of money (1 lakh or in multiples
of 1 lakh thereafter).

Because of the restriction on minimum investment amount, CDs are more

popular amongst organizations than individuals who are looking to park their
surplus for short term, and earn interest on the same.

The maturity period of Certificates of Deposits ranges from 7 days to 1 year, if

issued by banks. Other financial institutions can issue a CD with maturity
ranging from 1 year to 3 years.

4. Repurchase Agreements

Also known as repos or buybacks, Repurchase Agreements are a formal

agreement between two parties, where one party sells a security to another, with
the promise of buying it back at a later date from the buyer. It is also called a
Sell-Buy transaction.

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The seller buys the security at a predetermined time and amount which also
includes the interest rate at which the buyer agreed to buy the security. The
interest rate charged by the buyer for agreeing to buy the security is called Repo
rate. Repos come-in handy when the seller needs funds for short-term, s/he can
just sell the securities and get the funds to dispose. The buyer gets an
opportunity to earn decent returns on the invested money.

5. Banker’s Acceptance

A financial instrument produced by an individual or a corporation, in the name

of the bank is known as Banker’s Acceptance. It requires the issuer to pay the
instrument holder a specified amount on a predetermined date, which ranges
from 30 to 180 days, starting from the date of issue of the instrument. It is a
secure financial instrument as the payment is guaranteed by a commercial bank.

Banker’s Acceptance is issued at a discounted price, and the actual price is paid
to the holder at maturity. The difference between the two is the profit made by
the investor.

What is FIMMDA?
FIMMDA stands for The Fixed Income Money Market and Derivatives
Association of India (FIMMDA). It is an Association of Commercial Banks,
Financial Institutions and Primary Dealers. FIMMDA is a voluntary market
body for the bond, Money and Derivatives Markets.

What are the objectives of FIMMDA?

1. To function as the principal interface with the regulators on various issues
those impacts the functioning of these markets
2. To undertake developmental activities, such as, introduction of benchmark
rates and new derivatives instruments, etc.
3. To provide training and development support to dealers and support
personnel at member institutions.
4. To adopt/develop international standard practices and a code of conduct in
the above fields of activity.
5. To devise standardized best market practices.
6. To function as an arbitrator for disputes, if any, between member
institutions.
7. To develop standardized sets of documentation.

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The Function of RBI as a Regulator of the Money Market
1. The function of the RBI as a regulator of the money market is to regulate
and manage the country’s foreign exchange. 
2. It is in charge of the country’s currency and gold reserves. 
3. The foreign exchange rate reflects the demand for and supply of foreign
exchange resulting from trade and capital transactions on any given day. 
4. RBI works as a regulator of the money market. It also regulates the
Financial Markets Department (FMD). It also checks and regulates all the
functions which are done under the foreign exchange market. It facilitates
this foreign regulation by selling and buying foreign currency, which
helps in reducing the volatility during the time of excess demand for
foreign currency in the market. 

Role of Discount and Finance House of India (DFHI)

1. DFHI was incorporated in March 1988 and it commenced operation in April
1988. The main objective of this money market institution is to facilitate
smoothening of the short-term liquidity imbalances by developing an active
secondary market for the money market instruments. Its authorized capital is
Rs. 250 crores.
2. DFHI participates in transactions in all the market segments, it borrows and
lends in the call, notice and term money market, purchases and sells treasury
bills sold at auctions, commercial bills, CDs and CPs. DFHI quotes its daily
bid (buying) and offer (selling) rates for money market instruments to
develop an active secondary market for all these.
3. Treasury bills are not bought back by the RBI before maturity. Similarly,
except at the fortnightly auctions these cannot be purchased from the RBI.
DFHI fills this gap by buying and selling these bills in the secondary market.
The presence of DFHI in the secondary market has facilitated corporate
entities and other bodies to invest their short-term surpluses and to en cash
them when necessary.
4. The RBI extends reliance limit to the DFHI against the collateral of treasury
bills and against the holdings of bills of exchange with a view to imparting
liquidity to various money market instruments.
5. The enhancement of such limits from time to time enabled the DFHI to
provide higher and higher levels of liquidity in the period of stringency wit-
nessed in the money market. In the aftermath of the irregularities in transac-
tions in money and securities markets which emerged in 1992, there was a
reduction in overall trading volumes in almost all segments of the money
market.

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6. The DFHI’s business turnover in certain segments viz. treasury bills and
commercial bills continues to remain subdued even during 1993-94. The
easy conditions prevailing in the call money market discouraged secondary
market transactions in the treasury bills. Both the 91 days and 364 days
treasury bills are becoming preferred instruments in the money market.
7. Following the steps taken by the RBI in the last year to ensure that recourse
to bill finance takes place only in respect of genuine bills of exchange arising
from movement of goods and within the credit limits of borrowers, the
volume of bills available for discount/rediscount has reduced.

Role of STCI Primary Dealer Limited

(STCI PD) was set up as a wholly owned subsidiary of Securities Trading
Corporation of India (STCI) in 2006. STCI was among one of the first Primary
Dealers in the country set up in 1994 as a subsidiary of RBI. Subsequently,
RBI’s stake was divested in 1998 and 2000 in favor of leading public Sector
Banks and All-India Financial Institutions. STCI has since been renamed as
STCI Finance Ltd. In 2006, the PD business was de-merged by STCI into a
separate wholly owned subsidiary, STCI Primary Dealer Ltd (STCI PD). STCI
PD has an authorized capital of Rs 300 Cr and paid up share capital of Rs 150
Cr.
1. STCI PD is an established player in the Fixed Income and money
markets, catering to a diversified pool of investors across the Indian
geography.
2. The core activities of STCI PD comprise of underwriting, bidding, market
making and trading in Government Securities, Treasury Bills and other
fixed income securities. Apart from the above, the Company is an active
participant in the money market instruments. STCI PD plays an active
role in all segments of the debt market i.e. in both the SLR and non-SLR
segments. The Company runs a proprietary portfolio comprising of GoI
dated securities (including Floating Rate Bonds, Inflation Indexed Bonds,

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 etc.), GoI Special Bonds, State Development Loans, Treasury Bills,
Corporate Bonds, Commercial Papers, Certificates of Deposits, etc. As a
Primary Dealer the Company is also allowed to participate and trade in
STRIPS, Interest Rate Derivatives, and When Issued market and
undertake short selling in G-Secs on NDS OM.
3. STCI PD is a leading player in the retail and mid-segment of the debt
market with a large and diversified client base having pan India presence.
They have been actively facilitating clients in shaping strategies, assisting
in achievement of investment objectives while ensuring efficient service
aided by quality research. STCI PD has been at the forefront in adhering
to sound business practices and transparency in all its business dealings.
They strive to provide our clients a bouquet of investment solutions and
flawless execution which help them plan and manage their investments
better. To help their clients take well informed decisions, publish daily
market updates along with a host of other macro updates which impact
market dynamics.
4. STCI PD is an active member of Primary Dealers’ Association of India
(PDAI) and the Fixed Income and Money Market Derivatives
Association (FIMMDA). STCI PD has continued association with several
committees which interact with regulatory authorities

Foreign Exchange Dealers Association of India

(FEDAI) was set up in 1958 as an Association of banks dealing in foreign
exchange in India (typically called Authorised Dealers - ADs) as a self-
regulatory body and is incorporated under Section 25 of The Companies Act,
1956. Its major activities include framing of rules governing the conduct of
inter-bank foreign exchange business among banks vis-à-vis public and liaison
with RBI for reforms and development of forex market.
Presently some of the functions are as follows

1. Guidelines and Rules for Forex Business.

2. Training of Bank Personnel in the areas of Foreign Exchange Business.
3. Accreditation of Forex Brokers
4. Advising/Assisting member banks in settling issues/matters in their dealings.
5. Represent member banks on Government/Reserve Bank of India/Other
Bodies.
6. Announcement of daily and periodical rates to member banks.
7. Due to continuing integration of the global financial markets and increased
pace of de-regulation, the role of self-regulatory organizations like FEDAI
has also transformed. In such an environment, FEDAI plays a catalytic role

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 for smooth functioning of the markets through closer co-ordination with the
RBI, other organizations like FIMMDA, the Forex Association of India and
various market participants. FEDAI also maximizes the benefits derived
from synergies of member banks through innovation in areas like new
customized products, bench marking against international standards on
accounting, market practices, risk management systems, etc.

3. EXPLAIN THE STRUCTUTRE OF THE MONEY MARKET. WHAT

ARE THE FEATURES OF A DEVELOPED MONEY MARKET? WHAT

ARE THE DISADVANTAGES OF MONEY MARKET?

MEANING OF FINANCIAL SYSTEM: Every country aiming at its progress

depends on the efficiency of this economic system which depends upon
financial system. The economic development of a nation is reflected by the
progress of the various economic units. These units are broadly classified into
corporate sector, government and household sector. While performing their
activities these units will be placed in a surplus/deficit/balanced budgetary
situations.
There are organisations or people with surplus funds and there are those
with a deficit. A financial system or financial sector functions as an
intermediary and facilitates the flow of funds from the areas of surplus to the
areas of deficit. A Financial System is a composition of various institutions,
markets, regulations and laws, practices, money manager, analysts, transactions
and claims and liabilities. The financial system is the network of institutions and
individuals who deal in financial claims to various instruments. Financial
System of any country consists of financial markets, financial intermediation
and financial instruments or financial products.

Features of Developed Money Market Money

The developed money market is a well organised market which has the
following main features:

1. Central Bank:
A developed money market has central banks at the top which is the most
powerful authority in monetary and banking matter. I controls, regulates and
guides the entire money market. It provides liquidity to the money market, as it
is the lender of the last resort to the various constituents of the money market.

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2. Organised Banking System:
An organised and integrated banking system is the second feature of a
developed money market. In fact, it is the pivot around which the whole money
market revolves. It is the commercial banks which supply short-term loans, and
discount bills of exchange. They form an important link between the borrowers,
brokers, discount houses and acceptance houses and the central bank in the
money market.

3. Specialised Sub-Markets:
A developed money market consists of a number of specialised sub-markets
dealing in various types of credit instruments. There is the call loan market, the
bill market, the Treasury bill market, the collateral loan market and the
acceptance market, and the foreign exchange market. The larger the number of
sub-markets, the more developed is the money market. But the mere number of
sub-markets is not enough. What is required is that the various sub-markets
should have a number of dealers in each market and the sub-markets should be
properly integrated with each other.

4. Existence of Large Near-Money Assets:

A developed money market has a large number of near-money assets of various
types such a bills of exchange, promissory notes, treasury bills, securities,
bonds, etc. The larger the number of near-money assets, the more developed is
the money market.

5. Integrated Interest-Rate Structure:

Another important characteristic of a developed money market is that it has an
integrated interest-rate structure. The interest rates prevailing in the various sub-
markets are integrated to each other. A change in the bank rate leads to
proportional changes in the interest rate prevailing in the sub-markets.

6. Adequate Financial Resources:

A developed money market has easy access to financial sources from both
within and outside the country. In fact, such a market attracts adequate funds
from both sources, as is the case with the London Money Market.

7. Remittance Facilities:
A developed money market provides cash and cheap emittance facilities for
transferring funds from one market to the other. The London Money Market
provides such remittance facilities throughout the world.

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8. Miscellaneous Factors:
Besides the above noted features, a developed money market is highly
influenced by such factors as restrictions on international transactions, crisis,
boom, depression, war, political instability, etc.

Disadvantages of Money Market

Purchasing Power Can Suffer If an investor is generating a 3% return in
their money market account, but inflation is humming along at 4%, the
investor is essentially losing purchasing power each year.
Expenses Can Take a Toll When investors are earning 2% or 3% in a money
market account, even small annual fees can eat up a substantial chunk of the
profit. This may make it even more difficult for money market investors to
keep pace with inflation. Depending on the account or fund, fees can vary in
their negative impact on returns. If, for example, an individual maintains
$5,000 in a money market account that yields 3% annually, and the
individual is charged $30 in fees, the total return can be impacted quite
dramatically.

1. $5,000 x 3% = $150 total yield

2. $150 - $30 in fees = $120 profit
3. The $30 in fees represents 20% of the total yield, a large deduction that
considerably reduces the final profit. The above amount also does not
factor in any tax liabilities that may be generated if the transaction were
to take place outside of a retirement account.23

FDIC Safety Net May Not Be There

Money funds purchased at a bank are typically insured by the Federal
Deposit Insurance Corporation (FDIC) for up to $250,000 per depositor.
However, money market mutual funds are not usually government-insured.
This means although money market mutual funds may still be considered a
comparatively safe place to invest money, there is still an element of risk
that all investors should be aware of. If an investor were to maintain a
$20,000 money market account with a bank and the bank were to go belly
up, the investor would likely be made whole again through this insurance
coverage. Conversely, if a fund were to do the same thing, the investor
might not be made whole again—at least not by the federal government.

The 2008 financial crisis took a lot of the shine off the stellar reputation
money market funds had enjoyed. A large money market fund broke the
buck—the shares fell below $1.00—triggering a run on the whole money
market industry. Since then, the industry has worked with the Securities and

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 Exchange Commission (SEC) to introduce stress tests and other measures to
increase resiliency and repair some of the reputational damage.5 

Returns May Vary

While money market funds generally invest in government securities and
other vehicles that are considered comparatively safe, they may also take
some risks to obtain higher yields for their investors. For example, to try to
capture another tenth of a percentage point of return, the fund may invest in
bonds or commercial papers that carry additional risk. The point is that
investing in the highest-yielding money market fund may not always be the
smartest idea given the additional risk. Remember, the return a fund has
posted in a previous year is not necessarily an indication of what it may
generate in a future year.

It's also important to note the alternative to the money market may not be
desirable in some market situations either. For example, having dividends or
proceeds from a stock sale sent directly to you (the investor) may not allow
you to capture the same rate of return. In addition, reinvesting dividends in
equities may only exacerbate return problems in a down market.

Lost Opportunity
Over time, common stocks have returned about 8% to 10% on average,
including recessionary periods. By investing in a money market mutual
fund, which may often yield just 2% or 3%, the investor may be missing out
on an opportunity for a better rate of return. This can have a tremendous
impact on an individual's ability to build wealth.

What are derivatives

Derivatives are financial contracts whose value is dependent on an underlying
asset or group of assets. The commonly used assets are stocks, bonds,
currencies, commodities and market indices. The value of the underlying assets
keeps changing according to market conditions. The basic principle behind
entering into derivative contracts is to earn profits by speculating on the value
of the underlying asset in future.
Imagine that the market price of an equity share may go up or down. You may
suffer a loss owing to a fall in the stock value. In this situation, you may enter a
derivative contract either to make gains by placing an accurate bet. Or simply
cushion yourself from the losses in the spot market where the stock is being
traded.

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Characteristic of Derivatives Contract

Basic Characteristic of Derivatives Contracts involves:

1. Initially, there is no profit or loss for both the Counterparties in a

Derivative Contract
2. Fair Value of the Derivative Contract changes with changes in the
underlying asset over time.
3. It requires either no initial Investment or requires a small initial
investment compared to the actual outright buying/selling of the
underlying asset
4. These are always traded with future maturity and settled in the future.

Who participates in derivatives market?

Each type of individual will have an objective to participate in the

derivative market. You can divide them into the following categories
based on their trading motives:

Hedgers: These are risk-averse traders in stock markets. They aim at

derivative markets to secure their investment portfolio against the market
risk and price movements. They do this by assuming an opposite position
in the derivatives market. In this manner, they transfer the risk of loss to
those others who are ready to take it. In return for the hedging available,
they need to pay a premium to the risk-taker. Imagine that you hold 100
shares of XYZ Company which are currently priced at Rs. 120. Your aim
is to sell these shares after three months. However, you don’t want to
make losses due to a fall in market price. At the same time, you don’t
want to lose an opportunity to earn profits by selling them at a higher
price in future. In this situation, you can buy a put option by paying a
nominal premium that will take care of both the above requirements.

Speculators: These are risk-takers of the derivative market. They want to

embrace risk in order to earn profits. They have a completely opposite
point of view as compared to the hedgers. This difference of opinion
helps them to make huge profits if the bets turn correct. In the above
example, you bought a put option to secure yourself from a fall in stock
prices. Your counterparty i.e. the speculator will bet that the stock price
won’t fall. If the stock prices don’t fall, then you won’t exercise your put
option. Hence, the speculator keeps the premium and makes a profit.

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Margin traders: A margin refers to the minimum amount that you need to
deposit with the broker to participate in the derivative market. It is used to
reflect your losses and gains on a daily basis as per market movements. It
enables to get leverage in derivative trades and maintain a large
outstanding position. Imagine that with a sum of Rs. 2 lakh you buy 200
shares of ABC Ltd. of Rs 1000 each in the stock market. However, in the
derivative market, you can own a three times bigger position i.e. Rs 6
lakh with the same amount. A slight price change will lead to bigger
gains/losses in the derivative market as compared to the stock market.

Arbitrageurs: These utilize the low-risk market imperfections to make

profits. They simultaneously buy low-priced securities in one market and
sell them at a higher price in another market. This can happen only when
the same security is quoted at different prices in different markets.
Suppose an equity share is quoted at Rs 1000 in the stock market and at
Rs 105 in the futures market. An arbitrageur would buy the stock at Rs
1000 in the stock market and sell it at Rs 1050 in the futures market. In
this process, he/she earns a low-risk profit of Rs 50.

What Are the Different Types of Derivative Contracts?

The four major types of derivative contracts are options, forwards, futures
and swaps.

Options: Options are derivative contracts that give the buyer a right to
buy/sell the underlying asset at the specified price during a certain period
of time. The buyer is not under any obligation to exercise the option. The
option seller is known as the option writer. The specified price is known
as the strike price. You can exercise American options at any time before
the expiry of the option period. European options, however, can be
exercised only on the date of the expiration date.

Futures: Futures are standardised contracts that allow the holder to

buy/sell the asset at an agreed price at the specified date. The parties to
the futures contract are under an obligation to perform the contract. These
contracts are traded on the stock exchange. The value of future contracts
is marked to market every day. It means that the contract value is adjusted
according to market movements till the expiration date.

Forwards: Forwards are like futures contracts wherein the holder is under
an obligation to perform the contract. But forwards are unstandardized
and not traded on stock exchanges. These are available over-the-counter

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 and are not marked-to-market. These can be customised to suit the
requirements of the parties to the contract.

Swaps: Swaps are derivative contracts wherein two parties exchange their
financial obligations. The cash flows are based on a notional principal
amount agreed between both parties without exchange of principal. The
amount of cash flows is based on a rate of interest. One cash flow is
generally fixed and the other changes on the basis of a benchmark interest
rate. Interest rate swaps are the most commonly used category. Swaps are
not traded on stock exchanges and are over-the-counter contracts between
businesses or financial institutions.

How to Trade In Derivatives Market

 You need to understand the functioning of derivatives markets

before trading. The strategies applicable in derivatives are
completely different from that of the stock market.
 The derivative market requires you to deposit a margin amount
before starting trading. The margin amount cannot be withdrawn
until the trade is settled. Moreover, you need to replenish the
amount when it falls below the minimum level.
 You should have an active trading account that permits derivative
trading. If you are using the services of a broker, then you can
place orders online or on the phone.
 For the selection of stocks, you have to consider factors like cash in
hand, the margin requirements, the price of the contract and that of
the underlying shares. Make sure that everything is as per your
budget.
 You can choose to stay invested till the expiry to settle the trade. In
this scenario, either pay the entire outstanding amount or enter into
an opposing trade.
 Invest in Direct Mutual Funds
 Save taxes up to Rs 46,800, 0% commission

WHAT IS SECURITIZATION
Securitization means the change of non-liquid assets into securities. This topic
has become more popular, mainly due to the U.S. subprime mortgage crisis.
Securitization, specifically the packaging of mortgage debt into bond-like
financial instruments, was a key driver of the 2007-08 global financial crises.
Securitization fuelled excessive risk-taking that brought many major financial

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institutions on Wall Street and around the world to their knees when the U.S.
real estate bubble burst.
How Securitization Works

Securitization is the packaging of assets into a financial product. The

securitization of mortgage debt, particularly subprime mortgages, in mortgage-
backed securities (MBS) and collateralized debt obligations (CDOs), was a
major cause of both the U.S. real estate bubble in the early and mid-2000s and
the financial havoc that resulted from the popping of that bubble.

Banks and other lenders who issued mortgages to homebuyers then sold those
mortgages to bigger banks for repackaging into mortgage-backed securities and
CDOs.

Mortgage Securitization and Risk

Over time, because lenders issuing the loans passed them along to big banks for
securitization, they were no longer at risk if the homeowner defaulted. So
lending standards fell dramatically. This meant that many unqualified or under-
qualified borrowers—known as subprime borrowers—were able to secure risky
loans.

Down the line, the subprime mortgages in MBS and CDOs made them
attractive to big investors because they generated higher returns due to the
higher interest rates subprime borrowers were paying. At the same time, that
bundling was believed to reduce investors' risk, and the assets consistently
received stellar ratings from credit rating firms. So the assets were used as
leverage to control many trillions of dollars—many times the face value of the
underlying assets.

The Music Plays On

This situation was highly profitable to everyone as the real estate market
boomed, with buyers aggressively bidding up the prices of available houses.
Places such as California, Florida, Arizona, and Las Vegas saw astronomical
home-price increases as more and more easy money flooded in the market.

At first, subprime borrowers who fell behind on their payments

could refinance their mortgages based on higher property values or could sell
their homes at a quick profit. The amount of risk in the system was not an issue
as long as prices were rising. By 2005, subprime mortgages represented nearly
a third of the total mortgage market, up from 10% only two years earlier.

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The Music Stops
Things changed when the economy began to weaken and home prices began to
drift back toward earth. Adjustable-rate mortgages had already begun to reset at
higher rates and mortgage delinquencies surged higher.

By March 2007, the value of subprime mortgages had reached around $1.3
trillion. A little more than a year later, in July 2008, more than a fifth of
subprime mortgages were delinquent, and 29% of adjustable-rate mortgages
were seriously delinquent. The housing market was in free fall and the banks
holding mortgage-backed securities were in big trouble, scrambling to get rid
of them as their value plummeted. The financial crisis was in full swing.

Special Purpose Acquisition Company (SPAC) Explained:

Examples 

What Is a Special Purpose Acquisition Company (SPAC)?

A special purpose acquisition company (SPAC) is a company without
commercial operations and is formed strictly to raise capital through an initial
public offering (IPO) or the purpose of acquiring or merging with an existing
company.

Also known as "blank check companies," SPACs have existed for decades, but
their popularity has soared in recent years. In 2020, 247 SPACs were created
with $80 billion invested, and in 2021, there were a record 613 SPAC IPOs. By
comparison, only 59 SPACs came to market in 2019.

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How Does a Special Purpose Acquisition Company (SPAC)
Work?
SPACs are commonly formed by investors or sponsors with expertise in a
particular industry or business sector and pursue deals in that arena. SPAC
founders may have an acquisition target in mind, but don't identify that target
to avoid disclosures during the IPO process.

Called "blank check companies," SPACs provide IPO investors with little
information prior to investing. SPACs seek underwriters and institutional
investors before offering shares to the public. During a 2020-2021 boom period
for SPACs, they attracted prominent names such as Goldman Sachs, Credit
Suisse, and Deutsche Bank, in addition to retired or semi-retired senior
executives.

The funds SPACs raise in an IPO are placed in an interest-bearing trust account
that cannot be disbursed except to complete an acquisition or it will return the
funds to investors if the SPAC is ultimately liquidated.

In 2019, SPAC IPOs raised $13.6 billion in 2019, more than four times the $3.5
billion they raised in 2016. Interest in SPACs increased in 2020 and 2021, with
as much as $83.4 billion raised in 2020 and $162.5 billion in 2021. As of
March 13, 2022, SPACs have raised $9.6 billion.

A SPAC has two years to complete a deal or face liquidation. In some cases,
some of the interest earned from the trust can serve as the SPAC's working
capital. After an acquisition, a SPAC is usually listed on one of the major stock
exchanges.

Real-World Examples of SPACs

Richard Branson's Virgin Galactic was a high-profile deal involving special
purpose acquisition companies. Venture capitalist Chamath
Palihapitiya's SPAC Social Capital Hedosophia Holdings bought a 49% stake
in Virgin Galactic for $800 million before listing the company in 2019.

In 2020, Bill Ackman, founder of Pershing Square Capital

Management, sponsored his own and the largest-ever SPAC, Pershing Square
Tontine Holdings, raising $4 billion in its offering on July 22. In August 2021,
Ackman planned to liquidate the SPAC but as of 2022, the SPAC has not been
liquidated with efforts still underway to find a deal.

CASE STUDY ON SELF HELP GROUP

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  Gita Mehta is the leader of a Majkhali Self Help Group formed in 2000. In
addition Gita heads up the Majkhali Umang training centre teaching knitting
and stitching as well as running a village shop selling Umang products.
Confident, and self-sufficient Gita is a role model for many young women in
the community, and yet it wasn’t always so.

 Gita’s husband passed away three years into her marriage in 1996 leaving
her a widow with a small son. To help make ends meet Gita started knitting
for Umang. At first her family weren’t supportive, and felt it would distract
from her housework. But soon they realised how her income could help buy
food for the family.

 Today Gita has made enough money to buy her own house, expand her
business and send her son to an English medium school. But for Gita
helping other women in distress is her primary motivation and she offers
free training to those that cannot afford it.

MEANING AND ITS FUNCTION

Self-help groups are informal groups of people who come together to address their
common problems. While self-help might imply a focus on the individual, one
important characteristic of self-help groups is the idea of mutual support – people
helping each other. Self-help groups can serve many different purposes depending
on the situation and the need For example, within the development sector, self-help
groups have been used as an effective strategy for poverty alleviation, human
development and social empowerment and are therefore often focused on
microcredit programmes and income-generating activities (see Livelihood
component).

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Over the past 20 years, self-help groups have been used in various forms in the
disability sector, and self-help groups of people with disabilities and their families
are engaged in a whole range of activities including health care, rehabilitation,
education, microcredit and campaigning. Self-help groups can facilitate
empowerment; belonging to a group (or organization) is one of the principal means
through which people with disabilities can participate in their communities (see
Disabled people's organizations), and it is through the involvement in groups that
they can begin to develop their awareness and the ability to organize and take
action and bring about change

While many CBR programmes focus their activities at the level of the individual,
e.g. on providing direct assistance, such as basic therapy, they are encouraged to
bring people with disabilities and their family members together to form self-help
groups to address and resolve their own problems. Self-help groups are a key
element of the CBR matrix and can be a means to achieving the newly emerging
CBR goals of inclusion of and ownership by people with disabilities, and to
enhance their participation in development processes . This element mainly focuses
on how CBR programmes can facilitate the formation of new self-help groups, but
it also looks at the linking of CBR programmes with existing self-help groups of
people with disabilities and their families, including mainstream self-help groups

Characteristics

Some common characteristics of self-help groups that are associated with CBR
programmes include there:

 voluntary nature – they are run by and for group members, have regular
meetings, and are open to new members
 generally being formed in response to a particular issue, e.g. no access to
education for children with disabilities, limited income-generating
opportunities;
 clear goals, which originate from the needs of group members and are
known and shared by all members (
 informal structure and basic rules, regulations and guidelines to show
members how to work effectively together;
 participatory nature – involving getting help, sharing knowledge and
experience, giving help, and learning to help oneself
 shared responsibility among group members – each member has a clear role
and contributes his/her share of resources to the group;
 democratic decision-making; governance by members, using an external
facilitator only if necessary in the formation of the group
 evolution over time to address a broader range of issues;

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  possibility of joining together to form a federation of groups across a wider
area

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