What are the types of Financial markets?

The financial markets can be divided into different subtypes:

• Capital markets which consist of:
  • Stock markets, which provide financing through the issuance of shares or common stock, and enable the subsequent trading thereof.
  • Bond markets, which provide financing through the issuance of Bonds, and enable the subsequent trading thereof.
  • Commodity markets, which facilitate the trading of commodities.
  • Money markets, which provide short term debt financing and investment.
  • Derivatives markets, which provide instruments for the management of financial risk.
  • Futures markets, which provide standardised forward contracts for trading products at some future date.
  • Insurance markets, which facilitate the redistribution of various risks.
  • Foreign exchange markets, which facilitate the trading of foreign exchange.

The capital markets consist of primary markets and secondary markets. Newly formed (issued) securities are bought or sold in primary markets. Secondary markets allow investors to sell securities that they hold or buy existing securities.