What is Financial Market & Its Types?

The financial market may sound like a technical term at first but once you understand it, you will realize that it's very easy and practical. Read this article.

| Updated On August 12th, 2020 at 01:23 pm

Financial market may sound like a technical term at first but once you understand it, you will realize that its very easy and practical. Market refers to a place where there is an exchange of goods, services. Similarly, Financial market refers to place where  bonds, equity, securities, currencies are traded. Just like normal market, some shops are bigs while some are small similarly here, few financial markets do a security business of trillions of dollars daily, and some are small-scale with less activity. 

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Types of Financial Markets

There are different types of financial markets and some of them are given below:

Over the Counter or OTC Market – All those public stock exchange and New York stock exchange that are not listed in on NASDAW, American Stock Exchange and New York Stock Exchange are managed here. This market primarily deals with companies that are usually small companies that can be traded in cheap and has less regulation.

Bond Market – This refers to the market where investors loan money on bond as security for a specific time period and that too at a predefined rate of interest. The bonds are largely issued by corporations, states, municipalities, and federal governments across the world

Money Markets –This refers to the place where high liquid and short maturities are traded, lending of securities that matures in less than a year.

Derivatives Market – This refers to the place where the value of traded securities are determine from its primary asset.

Forex Market –This refers to the market where investors trade in currencies.

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Financial Markets and Institutions

Any organisation that helps in the efficient flow of investments and savings in the economy and helps to facilitate the growth of funds for producing goods and services is termed. The demands of investors, receiver and the overall economy of a country is progressed by the financial products and instruments and financial markets and institutions. This vast Financial market gives an opportunity to investors to specialise in specific services and markets. Financial market and financial are two pillars of a country growth

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Financial Market: Functions

Given below are some of the functions of financial markets:

  • Financial market is mainly responsible to mobilizes savings by trading it in the most productive methods.
  • The securities prices are also decided by the interaction with the investors and depending on the demand and supply in the market.
  • The bartered assets gets liquidity through Financial Market.
  • Financial market is the most effective place for parties as they don’t have to spend extra time and money to find potential clients to deal with securities.

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