What is the financial market?

The financial market is, by definition, a physical or virtual platform where economic actors meet. They exchange different products in a mechanism of supply and demand. In this article, we will give you an overview of the financial market.

The different types of financial markets

There are several kinds of financial markets. We can distinguish between the equity market and the bond market. In the equity market, we encounter companies that are looking for new capital to expand their capacity and grow further. The bond market offers financing opportunities to companies, but usually on a long-term basis. Governments also have the opportunity to borrow in the bond market, as do local authorities. It should be noted that it is also called the bond market. The various institutional investors finance themselves by debt through the money market. As types of financial markets, we can also mention the derivatives market and the currency market.

The functioning of financial markets

The functioning of financial markets is centered on two essential pillars which are: organized markets where there is no direct contact between sellers and buyers; and over-the-counter markets where the different players have the possibility to negotiate the terms of their transactions directly.

The role of financial markets

Financial markets play a very important role in the dynamics of the global economy. They facilitate various transactions insofar as actors are not always required to meet before concretizing their partnership. Financial markets save a great deal of time when it comes to completing transactions. In one click, it is possible to settle a large deal. They make it much easier to obtain financing and to buy and sell shares. It is also a way to get shares in distant companies without having to travel. It should be noted that financial markets operate according to certain rules. There are authorities that oversee their regulation in order to avoid possible inconveniences and abuses.

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