Financial markets enable trading of financial securities such as bonds, equities, derivatives and currencies. There are broadly three types of markets: money markets, credit markets, and capital markets:
- Money markets: These are short-term markets where money is lent to companies or banks to do interbank lending. Foreign exchange or FX is another category of money markets where currencies are traded.
- Credit markets: These consist mostly of retail banks where they borrow money from central banks and loan it to companies or households in the form of mortgages or loans.
- Capital markets: These facilitate the buying and selling of financial instruments, mainly stocks and bonds. Capital markets can be divided into two types: primary and secondary markets. Stocks are issued directly by the companies to investors in primary markets, whereas in secondary markets, investors resell their securities to other investors via stock exchanges. Various electronic trading systems...