What are financial markets?
The trading/exchanging of protections including the stock market(exchange), bond markets, forex markets, and derivatives markets among other markets are all known as financial markets sectors. A financial market is a marketplace where different kinds of fantastic markets work together.
In capitalist economies or societies, financial markets trade in all types of securities that are critical to an industrialist economy, it likewise assists the entrepreneur economy with working without a hitch and with practically no issue. At the point when monetary business sectors will come up short, then, at that point, it carries astonishing devastating impacts on an economy. Economic disruption including unemployment and recession can occur when financial markets fail.
By allocation of resources and creating liquidity for businesses and entrepreneurs, the financial markets make sure that the markets operate smoothly resulting in the growth of the economy as well. The presence of financial markets makes it easy for buyers and sellers to do business or trade in various financial holdings.
Whenever there is an excess of assets to a substance or a singular they allot their assets to borrowers and are called financial backers/investors. Borrowers can be new businesses or entrepreneurs that need funds to perform in a financial market.
Different types of financial markets
The stock market is a part of the financial market or financial exchange, here we need to know one thing the Financial market also includes bonds, derivatives, currencies, equities, and so on. Informational transparency is one of the premier things for a financial market and also they depend vigorously on that to guarantee the market set costs are suitable and effective.
Some financial markets are small and some are bigger and trade in trillions of dollars daily, like the New York stock exchange. Publicly traded companies are listed on the stock market, and their shares are offered to buyers and sellers to trade. Initial public offerings (IPO) are sold in the primary stock market whereas the second part of the stock market deals with the already owned securities.
The Over-the-counter (OTC) market is a decentralized market, it means that it has no physical presence and is done electronically. There is no broker involved and the trading is done directly between the participating parties. Most of the trading in the OTC market is done via exchanges.
Bond markets consist of bonds issued or ended to some person or entity by an investor or a company, it is called bond securities, and the trading is called a bond market. Bonds are issued by state governments/ central governments, municipalities, and some other high valuable institutions for the development of their low or high allocation projects and also their programs/events.
The money market has products with high liquidity and maturities and is known for a high degree of safety and relatively low returns on interest. Banks and mutual funds are good examples of the money market.
The cryptocurrency market is a newcomer in the financial market. In the past several years, cryptocurrency has seen a rise in the financial market. Cryptocurrencies such as Bitcoin and Ethereum are some examples of cryptocurrency.
Nowadays, these cryptocurrency currencies are more centralized with great encrypted and also they can easily be susceptible to fraud and then hacking. They can be exchanged for real money.