Different Types Of Financial Markets

Before we discuss anything, let us briefly discuss what a market means. A market is essentially a place where buyers and sellers meet to strike a deal for the exchange or trade of a product or service.

There are different types of markets present and they are distinguished based on the products they sell. Sometimes, markets may be distinguished based on the number of products they sell. For example, retail markets and wholesale markets are defined based on the quantity of the products they offer.

Sellers buy goods from wholesale markets in large quantities at cheaper prices to further sell them to the ultimate consumers or customers.

Some markets are organized once or twice a year. These are commonly known as seasonal markets. 

There are several types of markets and one such type is the financial market.

What are financial markets?

A financial market is a market where potential buyers and sellers meet to trade in financial securities. Financial markets are also known as capital markets.

Before discussing what is capital marketing, let us first briefly talk about what is meant by financial securities.

To put it in the simplest form, financial securities are tradable financial assets owned by a person, group of persons or an organization. Financial securities are negotiable assets that are usually intangible but hold some financial value.

The most popular types of financial securities are:

• Stocks

• Bonds

The term financial securities usually refer to financial marketing instruments but their legal definitions can differ in some cases. They might not always mean the same thing. Therefore, context is important. 

Are financial markets and capital markets the same?

A lot of people get confused about what is capital marketing and if financial markets are the same as capital markets. The answer to this question is, no.

There is a slight difference between what is capital marketing and what is financial marketing.

Financial markets are venues where people exchange assets and securities with one another. Capital markets on the other hand are financial markets where buyers and sellers meet and trade stocks, bonds, securities, etc.

What are the different types of financial markets?

Just as commodities markets are different from one another based on the commodities being sold or the number of commodities a particular market deals with; or how they are differentiated based on the time or duration of the organization of markets, financial markets are also of different types.

The different types of financial markets are classified as listed below:

• Stock market- you have probably heard of this one before. The Stock market is a common term and is associated with the trade and exchange of stocks as the name suggests. The stocks of publicly owned companies are listed in the stock market and come with a price. The investor earns money when the stock purchased by him works well in the market. The stock of a company also provides the investor with ownership of that particular firm since such companies are publicly owned companies.

• Bond markets- in a bond market, the buyer and the seller meet to trade the bonds of a company. The investor buys a company’s bonds which the company returns later at an agreed price.

• Derivatives markets- it is a financial market for derivatives, like futures contracts that are derived based on, let us say, different forms of assets.

• Commodities markets- the most common type of market is the commodities market. A commodities market is a marketplace where buyers and sellers meet to trade intangible goods and commodities of various types. These commodities can range from food items like rice, wheat, packaged food products to spare parts for cars.

As stated above, the different types of financial markets deal with exchanges among different types of products. With time, the definition of a market is not restricted to a physical place anymore. Markets can be organized virtually as well. Like online shopping websites. Such websites usually deal with the trade of several commodities in one place and while their warehouses or storage houses are physically present, the “market” does not exist physically but only virtually.

Conclusion:

We are sure you have understood now what capital marketing is. We have also tried to explain briefly the various components of the different types of markets and we hope you find this article helpful.