19-09-2017, 02:41 PM
A capital market is a financial market in which long-term debt or equity-backed securities are bought and sold. Capital markets are defined as markets in which money is provided for periods of more than one year. Capital markets channel the wealth of savers to those who can use it in the long run, such as companies or governments that make long-term investments. Financial regulators, such as the Bank of England (BoE) or the Securities and Exchange Commission (SEC), oversee capital markets in their jurisdictions to protect investors against fraud, among other functions.
Modern capital markets are almost invariably housed in computer-based electronic trading systems; most can only be visited by entities within the financial sector or treasury departments of governments and corporations, but some can be accessed directly by the public. There are many thousands of systems of this type, most service only small parts of the capital markets in general. Entities hosting the systems include stock exchanges, investment banks and government departments. Physically the systems are housed all over the world, although they tend to concentrate in financial centers like London, New York and Hong Kong.
A capital market can be a primary market or a secondary market. In the primary markets, new shares or bond issues are sold to investors, often through a mechanism known as underwriting. The main entities that seek to raise long-term funds in the main capital markets are governments (which may be municipal, local or national) and companies (companies). Governments only issue bonds, while corporations often issue stocks or bonds. Major entities that buy bonds or stocks include pension funds, hedge funds, sovereign wealth funds and less commonly wealthy individuals and investment banks operating on their own behalf. In secondary markets, existing securities are sold and bought between investors or traders, usually in a stock exchange, over-the-counter, or elsewhere. The existence of secondary markets increases the willingness of investors in the primary markets, as they know that they are likely to be able to withdraw their investments quickly should the need arise. A second important division is found among stock markets (for equity securities, also known as stocks, where investors acquire ownership of companies) and bond markets (where investors become creditors).
Modern capital markets are almost invariably housed in computer-based electronic trading systems; most can only be visited by entities within the financial sector or treasury departments of governments and corporations, but some can be accessed directly by the public. There are many thousands of systems of this type, most service only small parts of the capital markets in general. Entities hosting the systems include stock exchanges, investment banks and government departments. Physically the systems are housed all over the world, although they tend to concentrate in financial centers like London, New York and Hong Kong.
A capital market can be a primary market or a secondary market. In the primary markets, new shares or bond issues are sold to investors, often through a mechanism known as underwriting. The main entities that seek to raise long-term funds in the main capital markets are governments (which may be municipal, local or national) and companies (companies). Governments only issue bonds, while corporations often issue stocks or bonds. Major entities that buy bonds or stocks include pension funds, hedge funds, sovereign wealth funds and less commonly wealthy individuals and investment banks operating on their own behalf. In secondary markets, existing securities are sold and bought between investors or traders, usually in a stock exchange, over-the-counter, or elsewhere. The existence of secondary markets increases the willingness of investors in the primary markets, as they know that they are likely to be able to withdraw their investments quickly should the need arise. A second important division is found among stock markets (for equity securities, also known as stocks, where investors acquire ownership of companies) and bond markets (where investors become creditors).