Financial marketsFinancial market is a forum in which suppliers and marketers of funds can transact business directly.
The key financial markets are three types.......
1. On the basis of issuing
i. Primary market: Primary market is the financial market in which securities are initially issued; the only market in which the issuer is directly involved in the transaction.
ii. Secondary market: Secondary market is the market in which existing, already outstanding securities are traded among investors. In secondary market, the original issuer has no part in the transaction.
2. On the basis of security
i. Money market: Money market is the market for securities with maturities of one year or less. It is the short term securities market. The major money market securities are- Treasury bill, commercial paper, accounts payable, letter of credit, negotiable certificate of deposit etc.
ii. Capital market: Capital market is the market for long-term dept, bond and stock. The major capital market securities are- common stock, preferred stock, bond, mortgage and others debt instruments.
3. On the basis of trading:
i. Organized security exchange: The organized security exchange is the formal organizations that has physical location and exist to bring together buyers and sellers of securities in the secondary market. The organized security exchanges are- DSE, CSE, NYSE, LSE, TSE etc.
ii. Over the counter (OTC) market: The OTC market is the market for the purchase and sale of securities not listed by the organized exchange. The OTC market is made up the security dealers or brokers who use telecommunications; interact to create a market for various securities.