Introduction：
When appearance of the finance, there is no condition to form the financial market, and there is no doubt that the finance does not need the financial intermediaries, the financial market and the financial intermediaries forms when the finance develops to a certain degree, and will improve the efficiency of the finance. In the finance, the financial market and the financial intermediaries have important effect to the finance system; they can make the transaction in the financial market safe, and can reduce the risk in the transaction, and eventually make the transaction go smoothly. In the article, the author will pursue the deep reason why the financial market and the financial intermediaries exist, what characters they will act in the finance, and what effect they will have on the finance. Through the contradistinction of the financial market and the financial intermediaries, discuss the necessarily of the financial intermediaries when the financial market exists and has the similar effect to the finance. At the end of the article, the author will make a conclusion to the reason, in order to make the readers have a clear and certain reorganization.
The concept of the financial market and the financial intermediaries
The so-called financial markets, refers to the sum of currency funds accommodation and financial instruments traded places and behaviors. In this market, funds are the so-called commodity, of funds lending interest rate is the price of this special commodity "funds", financial instrument is the written carrier of the capital.
Financial markets as the sum of financial intermediaries and financial instruments transactions. They conclude not only indirect financing acts such as the bank, non bank financial institutions and other main transactions bodies, but also direct financing acts of other main transactions bodies, including financing behavior of banks and non-bank financial institutions, and financing behavior among the central bank and commercial banks and other financial institutions. Therefore, the bank's deposits and loans, bill discounting, lending, currency, bonds and shares issued and outstanding, trading in foreign exchange and gold are all belong to the areas of financial markets (Mankiw, 2008).
　　
Financial intermediaries refer to that in the process of funds accommodation in financial markets, the person or organization that can afford media and build the bridge among the fund suppliers. John Gregory and Edward G · S · Shaw (Edward S. Shaw) divided financial intermediaries into two categories: monetary system and the non-monetary intermediaries (Greenbaum and Thakor, 2007). Monetary system as an intermediary mechanism, can purchase of initial securities and create currency; non-monetary intermediaries perform only the intermediary function of initial purchase of securities and the creation of monetary, such claims take forms of savings deposits, shares, common stock and other bonds.
There are two major elements of the financial markets: First, participants of financial market, that is usually capital suppliers and demanders in the financial markets; second, trading partners in financial markets, that is, as commodity funds in form of financial instruments, according to the principle of equivalent exchange freely traded. Fund trading price - the interest rate, reflects supply and demand of funds.
Financial intermediaries are general constituted by the banking financial intermediaries and the non-bank financial intermediaries, specifically including intermediaries such as commercial banks, securities firms, insurance companies and information consulting services institutions, finance is the core of modern economy.
In the modern market economy, financial activities and economic performance are closely related, the scope and quality of financial activities, directly affects the performance of economic activity, almost all financial activities take the financial intermediaries as the centre, therefore, financial intermediaries occupy an important position in economic activities. As the degree of economic and financial deepening and economic globalization rapidly ahead, the financial intermediary itself becomes a very complex system, and the operating circumstance of this system have very important role to economic and social healthy development.
The reason why the financial market and financial intermediaries exist
In the financial market, there are also some surpluses and deficits in the economy, the surplus wants to borrow the funds to the deficits, and then get the repay from the surplus, and the deficits also need the funds to investment to get the profit, to the both sides, they all want to find intermediaries and medium to communication between the two sides, so the financial market and the financial intermediaries emerged accordingly. The financial market and the financial intermediaries can make sure that the funds transfer from the surpluses to the deficits. They can adjust the term structure, so as to minimize the liquidity crisis. From the borrowing side, intermediaries with a large number of depositors can normally predict the situation of the solvency requirements. As the importance of economies scale, intermediaries' assets and liabilities are highly specialized and such specialization improve their competitiveness and increase their chance of survival. Information economics theory and transaction cost theory argue that it is the presence of uncertainty and transaction costs lead to the emergence of financial intermediaries and financial intermediaries have the various functions of lowering transaction costs, eliminating uncertainty and the resulting risk.
\Causes of financial market and financial intermediation are the results of two types of asymmetric information and costly information products.
The first category of information asymmetry is compared to other investors; entrepreneurs have the information advantage to their investment. Other investors need to spend some resources for accessing to information;
Another type of asymmetric information is about the realized profits of investment projects. Entrepreneurs can easily understand the investment profits, while other investors need to spend some time and money. They considered that expensive information products are a typical situation of market failure. When and economic development related level of investment, much more surplus than any investor's savings, the market failed perform as repeating information production or no investment.
Clearly, repeating information production is a waste, because when an individual produce the information, such information is showing a characteristic of public wealth. Information production has professional characteristics on technically, which can make some individuals may become other agents of investors; they produce information and obtain compensation. This arrangement inherent has problems. How do investors ensure their message transfer agent make their best efforts? When the agent becomes a financial intermediary, the problem will be solved. Such financial intermediaries can raise capital investment from public investors. In this contract structure, the financial intermediary remuneration depends on the accuracy of the information production, thus the moral issued has been resolved. Therefore, someone recognized that as capital market incomplete and asymmetric information, spontaneous financial intermediaries generated because of the pre-item assessment of the cost savings (Chaves and World Bank, 2001).
Seen from the above analysis, previous studies of financial intermediaries are mostly from a narrow angle, and define the financial intermediation as banks and non-bank financial institutions, one of the main scopes of the study to financial intermediation within the financial institutions. With the development of financial industry and the improvement of the level of socio-economic virtualization, This kind of explanation to financial intermediation has been difficult to accurately explain the function and role of financial intermediation, and also cannot account for financial market development and penetration, promote and destructive effect of strong economic life. It is difficult to understand a virtual economic life and its development trend. Nature of financial intermediation is that resort into a third party among the process of savings - investment conversion, the final borrower and the last lender conversion of. In other words, financial intermediaries not only borrow money from lender of last resort, but also granted loans to ultimate borrowers, both have claims on the borrower, and has issue debt to the lender, thereby becoming a party of financial activities. Some people pointed out that the financial intermediaries (banks, mutual funds, insurance companies, etc.) are institutions which can transform financial contracts and securities. To the ordinary depositor financial claims issued by financial intermediaries are more attractive than debt issued directly by the companies. In the process of the assets conversion media, financial intermediaries buy financial forms right which is issued by company, such as equities, bonds, and other claims which is so-called first stage securities, and in the form of other forms such as deposit and insurance sell financial forms of ownership to the residents investors and other departments, in order to raise funds for the purchasing of these enterprises' securities. The rights of financial intermediaries' form may be considered as second stage securities, because these assets are guaranteed by business enterprises issued securities, enterprise in turn used to raise capital to invest in real property. In an ideal frictionless complete financial markets, investors and borrowers are able to receive a variety of well chosen and the best risk-sharing status.
But once the transaction technology appears smaller indivisibility and non-convexity, the ideal of diversity of the state will no longer exists; at this time, the market needs the participation of financial intermediaries (Mankiw, 2007). Therefore, financial intermediaries also can be seen as individual borrowers to seek scale economies combination in trading technology, the result is that individual get in almost perfect diversification choice. From a practical form of view, the financial intermediaries, major include bank intermediaries (some took it as sequestration intermediary institutions, in subsequent discourse, in general, no distinction between these two statements. It includes commercial banks, savings institutions and other deposit-taking institutions), insurance companies, other financial intermediaries (including securities companies and investment banks, finance companies, mutual funds and investment funds, etc.).
In the study of financial problems, agencies, institutions, law is important. For centuries, banking system has been always affected by the law and rules, if do not understand the effect of laws and rules which result of different structure of the banking system, it will be hard to make progress on many issues. The most obvious is changes in the industrial organization structure of the banking system in the world and the history. This change is now beginning to be concerned by research and needs further work. Risk, uncertainty, information costs and transaction costs constitute the objective requirements of the evolution of financial intermediation, while the institutional, legal and technology constitutes the reality conditions of intermediate evolutionary (Mishkin and Eakins, 2006).
The difference between the financial market and the financial intermediaries
From the course, the readers can see that the financial market can be divided into two markets, according to the characters of intermediaries; the direct financial markets mean the market that the capital requirements ones directly get the fluidity funds from the capital owners; it is the market that collect funds by the manners of Issuing shares and bonds. But the indirect market is such market that the provider of capital deposited the funds in financial institutions, financial institutions, and then pooled funds available to the funding needs. So this market taken the financial institutions as the financing intermediary market is an indirect financial market, such as money lending market. In the indirect market, the providers of funds loan their funds to the credit intermediaries such as the banks. And then these intermediaries transfer the funds to the funds demanders, in the course, no matter eventually who can make use of the funds, capital owners will only have a bond of the credit agency and cannot have any right requirements to the end user. The difference of direct and indirect financial markets financial markets is not whether there is involvement of financial intermediaries, but mainly on the characteristics difference of intermediaries. In the financial markets have direct financial intermediaries, but these companies do not like banks, it is not a financial intermediary, and the majority is information and services intermediary.
On the liquidity insurance function of financial intermediaries, it originated absorbing funds from a large number of scattered savers, and grant loans or investments. In this process of conversion, financial intermediaries at the expense cost of the liquidity of its assets to offer liquidity facilitate to savings. This is reflected in the institutions balance sheet, its liabilities are mainly short-term demand deposits, and assets are primarily consisted in long-term loan form. Liquidity insurance function of financial intermediaries are most from the application large numbers law: For the deposits of savers is a large number and dispersed, institutional can according to law of large numbers forecasts more accurate to the liquidity needs of savings; According to this forecast, after agencies retain a certain mobility of preparation, the remaining funds is used for loans or investment. It can be seen that the institution's liquidity insurance function subject to the following two factors: first, whether the forecast to liquidity needs of savers is accuracy or not, or large numbers law is application or not. Under conditions of social stability and economic environment stable, people's expectations about the future will be uncertain. Behavior of its current revenue and expenditure will also occur variations, affecting the accuracy of sector liquidity demand forecast. In extreme cases, people will flock to institutions at the same time, withdraw or panic runs, and even trigger off a "domino effect", causing the financial crisis, interrupt the flowing conversion chain of financial intermediaries. Second, whether financial intermediary institutions can smooth recovery of their lending or investment. In general, institutional loan or investment is a long-term, the longer term, the greater the risk of occurrence of bad debts. If the institutions operate inadvertently, accumulated a large amount of bad loans, it will interrupt the flow of conversion of the chain. Among intermediary institutions and enterprises lenders, in addition to lending relation, the two sides are still have relation with capital settlement, stock control, personnel exchanges.
Comparison of monitoring function in financial intermediation and the role of securities markets, both have their advantages, but they also has its own limitations; but in incentive mechanism, the stock market can provide the management contracts related with equity-linked, and financial intermediation cannot do anything.
Conclusion
Through the analyze of the financial markets and the financial intermediaries, the readers can see that as the tool of the financial transaction, the financial markets and the financial intermediaries are the mediums that can make the fund transfer from the surplus to the deflect, and in this progress, financial can afford the credit risk, and make the financial market develop smoothly, but at the same time, there are some differences between the financial markets and the financial intermediaries, in the direct financial market, there does not need the intermediaries, the funds can transfer directly from the surplus to the deflects, and the borrowers can also easily get money from the lenders. And this progress can safely solve in the financial markets. But the financial intermediaries are mainly exist in the indirect financial market, and afford the medium of the market, so the financial markets and the financial intermediaries can also be thought as the medium to make the transaction go smoothly and safe.
