Basic Understanding Of Capital Market
In an economy, the financial market is broadly classified into two – money market and capital market. The capital market deals only in financial instrument or commodities that have more than one year of maturity and are long-term securities. The capital market is totally different from the currency market or money market even though it performs certain functions just like the money market. The common thread between both the markets is that it offers a link between the wealth creators and investors. One of the biggest differences both the market is that introduction of the automated trading robots in the currency market. There are many renowned robots that have been introduced in these markets especially in the digital currency market. Ethereum code is an example of these robots. Continue reading about these robots here to enhance your knowledge in this field.
More insight into capital market
The capital market’s important function is that it offers ease of transaction to both organizations and the investors. Both the parties can find each other quite easily in this market and all the legal aspects too will be taken care of smoothly.
The capital market is divided majorly into two markets- primary market and secondary market.
Primary market- the Primary market is the most important type among the capital market. This is also known as the new issue market. It only deals with issuing of new securities. It means these securities will be issued for the first time to the investors. Primary market’s main function is the capital formation of companies, governments, etc. The companies raise additional fund to expand their existing organization or to start a new project. The organizations raise this money through issuing shares, debentures, bonds, preference shares, etc.
Secondary market- It is also known as a stock exchange or stock market. Here the securities like bonds, shares, debentures, etc are sold and bought by the investors. The main difference between these two markets is that in the case of the primary market, only the new securities will get issued whereas, in the secondary market, only the existing securities get traded. There will be no fresh issue here in the secondary market. The securities get traded in legalized and highly regularized stock market which follows strict rules and regulations. It ensures that all the investor can trade in this market without getting cheated. The investors can trade in their shares during the trading time with the help of a licensed broker.