A capital market is where organisations raise long-term finance and where those instruments then change hands. It has two halves: the primary market, where new shares and bonds are issued and the money reaches the issuer, and the secondary market, where investors trade those instruments among themselves.
Key takeaways
- Only the primary market raises money for the issuer; the secondary market makes the primary one possible by giving buyers an exit.
- Capital markets channel savings into long-term investment, complementing bank lending.
- They depend on disclosure and enforcement, without them, buyers cannot price anything.