The financial instruments market – an institutional approach

Abstract

In response to the last financial crisis new institutional reforms were implemented. The aim for these reforms is to save and secure the functioning of markets in financial instruments. It seems though that these efforts lack the clarity of the basic notion, which is the term “institution”. This weakness my cause interpretational problems on both theoretical and practical level. The aim of this article is to clarify the understanding of the notion of “institution” in finance. One of ways to achieve this goal is to present the institutional structure of the market in financial instruments, to specify the characteristics of both individual institutions and the whole environment in which they act. And, lastly, to outline an institutional transformation process which is driven by innovations. The classification of institutions is also proposed. As a result of analysis, following types of institutions are singled out: institutions in a broad meaning (established through institutional contracts), institutions in a narrow sense (norms and social rules). Additionally, the formal and informal institutions are distinguished.