Thoroughly updated, this new sixth edition of Financial Institutions and Markets focuses on Australia's financial system, while retaining the structure of the successful fifth edition. It examines the financial system's three main functions - settlement, flow-of-funds and risk transfer - and provides a clear and comprehensive integrated account of the activities of Australia's financial institutions and markets, including the risks they face and the instruments they use. As well, the major capital and foreign exchange markets and the markets for derivatives (and their use as hedging instruments) are discussed.This new 6th edition covers recent financial innovations, such as high-frequency trading in the share market and APRA's adoption of Basel II (and Basel III) - an explanation of how the RBA assesses the financial system's stability. It also includes new 'Industry Insights' and 'Practical Applications' that illustrate specific topics, such as the role of margin loans and short selling in the demise of ABC Learning. The main update for this new edition has been the development of 'Lessons from the GFC' that are designed to complement the book's explanations of a range of topics, such as the use of leverage, lending for housing, securitisation, the role of the inter-bank market, the pricing of risk in bond markets and the role of speculation in the market for Australian dollar.