What is the Definition and Features of a Capital Market?

Definition of Capital Market

A capital market is where financial securities like shares, bonds, or financial instruments are traded by their buyers and sellers. Individual and institutional investors trade all kinds of financial securities in that market. Generally, long-term securities or debt are traded; whose maturities have one or more years.

Capital markets exist in two parts: the primary market and the secondary market. The primary market refers to new securities born and sold first. In contrast, the secondary market refers to those securities that already exist in the primary market and then come on the secondary market for trade.

Features of Capital Market

The capital market has an immense sense in terms of its usage and network, which does not work only in a particular sector or nation, but it works worldwide and globally. That can include stock market, bond market, foreign stock market, currency market, etc. The capital market has excellent features, which are given below;

It connects to savers and investors

The capital market enables to connect the link between savers and investors. Through this link, the savers who want to lend their money can easily process via the capital market, same as the investor who is seeking money can easily raise funds from the capital market. Here the capital market provides systemized mechanism between savers and investors.

It deals in long term fund

Generally, the capital market provides medium-term and long-term funds. For example, the age of securities maturities is one year and more. It never deals with sort term funds that are less than one year of maturity.

Utilizes Intermediaries

It is an essential element of the capital market that utilizes various intermediaries like brokers, underwriters, depositors, etc.

Government Rules and Regulations

The capital market operations are governed under the guideline of the government policies, rules, and regulations. The framework of the capital market is covered under the rules and regulations. For example, the stock exchange works under the guidelines of SEBI, which the government declares.

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