Financial Markets – Types, Scope & Objectives, My this article is about the financial markets which are prevailing in the country of which, the most acceptable market. What do you think, who would be regulating the financial markets. The answer to the question is Reserve Bank of India (RBI). The financial markets consists of many types of which I have explained here some of the markets. Financial Markets are the one which there is involvement of equities, debts, bonds etc. Financial markets are the target for the investors and they are the main target of the investment.
This are the markets where the buyers and the seller participate in the trading of the financial instruments such as equity, bonds, debt instruments, derivatives, etc.
Where does financial market help in?
- Capital Raising
- Risk Transferring
- Liquidity Transfer
- International Trading
Types of Financial Markets:
1. Capital Markets –
Capital Markets are the one where the parties who want to raise the capital would raise the same, and the one who is interested in investing the money and getting the returns on it would give the same. The capital market would include both, the primary market and the secondary market. There are various types of capital markets. They are:
a. Stock Market: This is the market which is the most popular market in the today’s world. Every day, Lakhs of crores of rupees transaction happen on this market. Here the institutions list their securities and raise the money. There are mainly two markets involved in this market; they are primary market and the secondary market. In primary market – the first time listing issues are done and the following issues would be done on secondary market.
b. Bonds Market: This Bonds market would borrow funds from the market at fixed interest rates and would also get the additional benefits as per the offers by the companies issuing the same. They are alternatively known as treasuries and issued mainly by the government of that particular country.
2. Money Markets –
This market is especially for the short term maturity deposits or the instruments which are traded. Here the person willing to get the money back in the short term would trade on it. Money Markets would include Certificate of Deposits, Bankers Acceptance, Commercial paper, Municipal notes etc. There is no precise definition of money markets. Generally they are the markets in which the instruments are traded for a period of less than 1 year. As the money is returned within a short period of time, there would be fewer returns, or if more risks, there would be more risk involved in it.
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3. Spot Market –
Spot markets are also known as the market where the investment is done through cash only. Prices would be settled on the spot of the current market prices. In this, the trade is determined at the forward prices. This market is very much complex and not suitable for the first time investors.
4. Derivatives Market –
This market is normally known as the speculation market. Here the price is determined on the basis of the demand and the supply in the markets. The price is decided by the market forces. It is a very risky market, where one can become millionaire in one day also and can become moneyless in one day also.