- Primary Markets and Secondary Markets
- Money Markets and Capital Markets
- Spot Markets and Futures Markets
- National and International Markets
- Organized Stock Exchanges and Over-the-Counter (OTC) Market
1. Primary Market
The primary market is the market where new financial securities are issued and sold for the very first time. In this market, companies, governments, or other entities raise fresh capital by offering shares, bonds, or debentures to investors. The main function of the primary market is to facilitate capital formation. For example, when a company launches an Initial Public Offering (IPO), it is done in the primary market.
2. Secondary Market
The secondary market is the market where previously issued securities are bought and sold among investors. Unlike the primary market, no new capital is raised here; instead, it provides liquidity and marketability to existing securities. Stock exchanges such as the New York Stock Exchange (NYSE), NASDAQ, or Nepal Stock Exchange (NEPSE) are examples of secondary markets.
3. Money Market
The money market deals with short-term financial instruments and securities that typically mature in less than one year. It is mainly used for managing short-term liquidity needs of businesses, governments, and financial institutions. Instruments traded in the money market include Treasury Bills, Commercial Papers, Certificates of Deposit, and Repurchase Agreements (Repos). It is considered low risk and highly liquid.
4. Capital Market
The capital market is the market for long-term financial securities with maturities greater than one year. It helps companies and governments raise long-term funds for expansion, infrastructure, or development projects. The capital market includes both the equity market (shares and stocks) and the debt market (bonds and debentures). It plays a vital role in economic growth by channeling savings into long-term investments.
5. Spot Market
The spot market is the market where financial assets are traded for immediate delivery and payment. Transactions in the spot market are settled “on the spot,” meaning buyers pay cash and take ownership of the asset right away. For example, buying shares at the current market price in a stock exchange is a spot market transaction.
6. Futures Market
The futures market is the market where financial assets or commodities are traded based on contracts for future delivery at a predetermined price and date. These contracts help investors and businesses hedge against future price fluctuations or speculate on expected price changes. For example, a farmer may sell a wheat futures contract to lock in a price for his harvest in advance.
7. National Market
The national market refers to financial markets that operate within the boundaries of a specific country. Transactions are conducted in the national currency and are regulated by the respective country’s financial authorities. For example, NEPSE in Nepal or BSE in India are part of their national markets.
8. International Market
The international market is the marketplace where financial securities are traded across national borders. It facilitates the movement of capital globally, allowing investors to diversify internationally and companies to raise funds from foreign investors. Examples include Eurobond Market, International Stock Exchanges, and Foreign Exchange (Forex) Markets.
9. Organized Stock Exchange
An organized stock exchange is a regulated marketplace where securities are bought and sold under standardized rules and regulations. These exchanges provide transparency, investor protection, and fair trading practices. Examples include the New York Stock Exchange (NYSE), London Stock Exchange (LSE), and Nepal Stock Exchange (NEPSE).
10. Over-the-Counter (OTC) Market
The Over-the-Counter (OTC) market is a decentralized market where financial instruments are traded directly between two parties without going through a centralized exchange. Transactions are often conducted electronically or over the phone. It is commonly used for trading in bonds, derivatives, currencies, and smaller company stocks that may not meet the listing requirements of formal exchanges.
