Capital Market Write For Us – What is Capital Market?
A Capital Market is where individuals and companies borrow funds using stocks, bonds, debentures, debt securities, etc. Besides, the most common example is stock exchange like the NASDAQ, trading shares of different companies between investors.
- Providers typically include banks and investors, while those seeking capital include companies, governments, and individuals.
- And also, Capital markets are primary and secondary markets; the most common capital markets are the stock market and the bond market.
- Capital markets seek to improve the efficiency of transactions. Further, these markets bring together providers and seekers of capital and provide a place where they can trade securities.
- Capital markets are useful for selling financial products such as stocks and debt securities. Stocks are shares, which are shares of ownership in a company. Therefore, Debt securities, like bonds, are acknowledgements of interest-bearing debt.
- And also, these markets fall into two categories: primary markets, where newly issued stocks and bonds are for sale to investors, and secondary markets, which trade existing securities. Capital markets are a crucial part of the functioning of a modern economy because they transfer money from those who have it to those who need it for productive purposes.
Types of Capital Market – Primary Market vs Secondary Market
Primary Market
When a company publicly sells new shares or bonds for the first time, such as in an initial public offering (IPO), it does so in the primary capital market. So, this market is sometimes known as the new issue market. Further, when investors purchase securities in the primary capital market, the company offers the securities contracts with an underwriting company to review the stakes and create a price prospectus.
And also, all issuances in the primary market are subject to strict regulations. Companies must file returns with the Securities and Exchange Commission (SEC) and other securities agencies and wait for their filings to be approved before they can be made public.
Retail investors often cannot buy securities in the primary market because the firm and its investment bankers want to sell all available securities quickly to meet the required volume. Besides, they focus on marketing the sale to large investors. So, they can buy more securities at once. In addition, Marketing the deal to investors can often include a roadshow or dog-and-pony show. So, investment bankers and company executives travel to meet potential investors and beat them to the value of the issued security.
Secondary Market
The issuing companies do not participate in the secondary market. On the other hand, the secondary market includes places overseen by a regulatory body like the SEC.
The secondary market includes two different categories: auctions and dealer markets. And also, the auction market houses the protest system where buyers and sellers meet in one place and announce the prices at which they are willing to buy and sell their securities. In addition, most retail investors trade through dealer markets, Ex: New York Stock Exchange. However, In dealer markets, people trade through electronic networks.
Are Capital Markets the same as financial markets?
Although there is sometimes a lot of overlap, there are fundamental distinctions between these two terms. And also, Financial markets encompass a wide range of places where people and organizations exchange assets, securities, and contracts and are often markets.
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