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The primary financial market, also known as the stock market, is where people buy and sell stocks of public companies. The prices of stocks rise and fall depending on supply and demand. Financial markets are the meeting points for buyers and sellers of financial assets. They are the first point of contact for investors to buy or sell stocks, bonds, futures, and other types of securities.
The function of financial markets is to gather all the information relevant to a particular security and make it available to the interested investors. This includes information about market prices, trading volume, trends in supply and demand and new regulations. Financial markets perform the following functions:
- Provide a way for people to exchange assets
- Provide a way for people to raise capital
- Provide a way for people to invest
- Facilitate the price discovery process
- Facilitate the hedging process
What Are Financial Markets? Overview Of Different Types of Financial Markets
Financial markets can be broadly classified into primary, secondary and tertiary markets.
- Primary market: The primary market is the market where securities are first offered for sale. This is also known as the new issue market or initial public offering (IPO) market. The primary market is responsible for issuing new securities to investors and raising capital for companies. It includes IPOs, private placements and other types of equity offerings.
- Secondary Market: The secondary market is where securities are traded among investors after being issued by the company or government agency that initially sold them in the primary market. This includes stocks, bonds, options, and other debt instruments that trade on exchanges such as the NYSE or NASDAQ.
- Tertiary Market: Financial institutions that do not have a banking licence and are unable to accept deposits from the general public are referred to as tertiary markets. Interbank cash transfers (wire transfers), currency exchange, and other services are provided by these institutions for the benefit of bank customers.
Who Controls Financial Markets?
A share market is a place where stocks and other securities are traded. The companies that offer these securities are called the issuers, and the people who buy them from the issuers are called investors.
The most important thing to know about the share market is that it’s controlled by anybody who owns shares in it. This means that anybody who buys or sells shares in a company, whether they do so through a stockbroker or not, influences what happens to that company’s share price.
How can Markets Work for You?
Share Markets work for you by providing liquidity to the buyer and the seller. If you have shares in a company that you want to sell, but nobody wants to buy them from you at the price you want, then it’s likely that someone else will be willing to accept them at your desired price. The cost of a share on the market fluctuates too. If you are selling shares you bought at a higher price, they may be worth more when they are sold on the market than when you bought them. The opposite is also true – if you buy shares at a lower price, the value may increase for you when sold.
Pros of the Financial market
- Financial market/ share market provides a place to invest in stocks, shares or other assets.
- It provides liquidity to the market, which means that investors can buy or sell their assets.
- The prices at which people buy and sell their assets are determined by the laws of supply and demand. This means that prices fluctuate based on how much people want help.
- It provides companies with an easy way to raise money
- It provides individuals with an easy way to invest in the company they believe in
- It provides customers with an easy way to buy goods and services from a company they believe in.
Cons of Financial Market
- The share market can be hazardous because the prices of shares can change quickly without warning.
- Many scams target people who don’t know much about investing in the share market.
- Some brokers may not be trustworthy and could take your money without giving you anything in return.
- The market sometimes can be volatile. The prices can change in a short period and can significantly affect the economy.
- There is also a lack of liquidity, which means it is difficult to buy or sell stocks, bonds, or other securities within a short period.
Conclusion
In conclusion, a financial market is where investors can buy and sell stocks, bonds, commodities, currencies and other financial instruments. The financial market is an essential part of the economy because it provides people’s money to buy goods and services. The financial market is where people can invest for the future and where companies raise money to support their business.
But not all countries have the same financial need. In some countries, the stock market includes bonds; in others, it doesn’t. The financial markets are more critical when a country’s economy gets weak, and there isn’t enough money to go around. In such a scenario, the stock market falls, investors and traders get very worried, and there is usually high unemployment.
