• 3,000 firms
  • Independent
  • Trusted
Save up to 70% on staff

Home » Glossary » Capital Market

Capital Market


What is the capital market?

A capital market is a marketplace where sellers and consumers trade financial securities such as bonds, stocks, and other derivatives. Many individuals and companies are participating in the buying and selling in capital markets. 

There are two standard compositions in capital markets:

  • The primary markets
  • The secondary markets

The goal of capital markets is to increase transactional efficiency. The capital market provides a venue for companies to trade assets.

Importance of capital markets

One of the essential functions of capital markets is to make transactions easier for investors and businesses. It will be more convenient for both stakeholders to settle the legal side of the business directly. 

Capital markets provide the same purposes as financial markets. It bridges the gap between investors and wealth generators. The funds will be employed for productive purposes, generating wealth in the economy over time.

Importance of capital markets

Two primary forms of capital markets

The capital market is an essential part of a national economy because they transfer money from those who have it to those who require it for productive purposes.

Here are the two types of capital markets:

1. Primary Markets

The most important form of capital market is the primary market. Specific investors who acquire securities directly from the issuing company might participate in primary markets. 

These securities are referred to as initial public offerings (IPOs). When a firm goes public, large-scale and institutional investors buy its stocks and bonds.

On the primary market, all issues are subject to strict control. Companies must submit filings with the Securities and Exchange Commission (SEC) or other securities regulators before going public, and they must wait for their filings to be authorized.

Because demand is difficult to predict when security is first issued, prices in the primary market are frequently unpredictable. It usually results in too many lower priced initial public offerings (IPOs).

Following the secondary market, a corporation can issue more equity in the primary market. Investors will be given prorated rights based on the number of shares they already possess.

2. Secondary markets

The secondary market refers to places where existing securities are sold between investors and are regulated by a regulatory agency such as the Securities and Exchange Commission (SEC).  

It also includes the New York Stock Exchange (NYSE) and Nasdaq. The secondary market is not accessible to issuing corporations.

As supply and demand for the security fluctuate, the number of securities traded varies from day today. It has a significant impact on the security’s price.

The secondary market is divided into two categories:

  • Auction. Buyers and sellers congregate in one spot and disclose the prices they are willing to purchase and sell their securities, which is found in the auction market.
  • Dealer markets. People trade over electronic networks in dealer markets. The majority of small investors trade on dealer markets.

Anyone can buy securities as long as they can pay the asking price per share on the secondary market. Also, small investors have a higher possibility to trade stocks in the secondary market because of their exclusion from IPOs.

Under strict rules and regulations, the securities are exchanged in a highly regularized and authorized market. As a result, investors can trade without the worry of being scammed.

Get Inside Outsourcing

An insider's view on why remote and offshore staffing is radically changing the future of work.

Order now

Start your
journey today

  • Independent
  • Secure
  • Transparent

About OA

Outsource Accelerator is the trusted source of independent information, advisory and expert implementation of Business Process Outsourcing (BPO).

The #1 outsourcing authority

Outsource Accelerator offers the world’s leading aggregator marketplace for outsourcing. It specifically provides the conduit between world-leading outsourcing suppliers and the businesses – clients – across the globe.

The Outsource Accelerator website has over 5,000 articles, 450+ podcast episodes, and a comprehensive directory with 3,900+ BPO companies… all designed to make it easier for clients to learn about – and engage with – outsourcing.

About Derek Gallimore

Derek Gallimore has been in business for 20 years, outsourcing for over eight years, and has been living in Manila (the heart of global outsourcing) since 2014. Derek is the founder and CEO of Outsource Accelerator, and is regarded as a leading expert on all things outsourcing.

“Excellent service for outsourcing advice and expertise for my business.”

Learn more
Banner Image
Get 3 Free Quotes Verified Outsourcing Suppliers
3,000 firms.Just 2 minutes to complete.
Learn more

Connect with over 3,000 outsourcing services providers.

Banner Image

Transform your business with skilled offshore talent.

  • 3,000 firms
  • Simple
  • Transparent
Banner Image