What is a capital market?

A capital market is a market (both domestic or international) where entities such as companies, financial institutions, and governments borrow and/or invest money.

The key role of a capital market is to act as a vehicle for borrowers (parties seeking to raise financing) to easily and efficiently access investors (parties with surplus funds looking to lend to borrowers).

Key features of capital markets:

  • The products or instruments being traded in capital markets are called Securities. Securities are certificates signed by the issuing party (known as the issuer) and outline the terms of the issuer’s contract with the buyer of the security. This security can also be sold or transferred by the buyer to another buyer.
  • Capital markets offers borrowers (eg. a business seeking funding/financing) access to sources of funds that are not banks or financial institutions.
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