Financial Derivatives -a Different kind of new financial Parameter

 The parameter changes examined  have been connected to resources such as lithium,oil and uranium.The parameter changes have usually resulted in an increase in value of the resource.Often this is because the changes have highlighted new uses leading to increased demand.Likewise a financial derivative can create a new usage for an asset.As a true financial derivative is an asset whose value is dependent on the performance or price of an underlying asset.Actually a financial derivative is not another asset;it is a contract.A contract  taken by an option to buy or sell an underlying stock at a contracted price.But here a derivative is taken in a more general way.It is a second asset (an ETF) that moves in the same direction as the underlying asset but not by the same amount nor even the same percentage..ETFs have not been around for very long and certainly have not been popular with investors for very long at all.But it is an excellent way to reduce investor risk.As an ETF or exchange traded fund contain varying amounts of 15-20 individual stocks.This reduces risk instead of putting all the investor's funds into one stock.
     Some Interesting Banking ETFs.

  ETFs were introduced in 1993.But have only been popular for the last 20 years.At first the fund manager acted as a passive trader. As 15-20 stocks were purchased and never traded.They were called mutual funds.However they had a place with investors that wanted to diversify investor risk..But newer funds  took a more active approach.The manager purchased the original 15-20 stocks and as one or two fell out of favour they were replaced by other stocks that were performing better.Thus bringing up the ETFs total return.This is called active trading and it raised the interest of investors..And active trading  volumes started to grow exponentially.Also mutual funds and ETFs have had a large and dynamic impact on the stock market.For example,in some sectors the market value of ETFs is a very substantial percentage of total market value of the sector.This means that movement by a large number of ETFs in one direction can possibly change the direction of the sector.Here this blog picks as attractive ETFs ones  such as ZEB, XFN,CIC,and,RBANK,

  One sector that has been significantly affected by ETFs is the financial sector.This blog believes that all of the biggest ETFs have a substantial financial component;the top 5 ETFs have a market value over $500 million.In addition,the TSX contains an ETF that holds all the companies  and ETFs listed on the TSX ,MX(Montreal) and other exchanges.It does not own the earnings from these companies but gains from the performance of the  overall index of the exchanges.This ETF is one of a kind;it is the TMX group  and has  for its symbol the letter X.Its earnings come from the new financings of stocks and ETFs that want to enter one of their Exchanges.This then is a different kind of  financial derivative.

This is a different kind of financial derivative.But it most certainly gets it's value from the underlying assets.TMX has been listed on the TSX since 2003 when  the stock price was in the $1 area .And it's market value has grown consistently since then.This blog calculated that the market value was  less than $1 billion in 2003 and now the market cap is roughly $16 billion.So X (the TMX Group) has been tremenduously successful  .Every month sees new listings and that means increased revenues from services and exchange fees.In conclusion, an investor,through the TMX Group, can invest in the future success of the TSX and a few other exchanges.This is a definite change in the financial parameters. of the TSX.And it has rewarded investors since 2003.

The change in parameters.

These financial parameters and the earlier mentionned resource parameters all act to increase the return of investors in the TSX.All make the underlying asset more attractive to investors.In fact,these changed parameters have allowed the exchange P/E ratio to climb higher.So the expected price is higher given a certain level of company earnings.This benefits the institutional investor as well as the retail investor when he sells.

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Dale McIntyre is a freelance writer that writes blogs  for brokers such as Marketbeat.com and Yahoo Finance