The financial market functions based on:
- Intermediary functions:
- Transfer of resources: Financial markets help in the completion of transaction of the economic resources to the borrowers from the lenders. In a normal business, financial entities like money, commodities, derivatives, bonds, shares, foreign currency are traded. On the other hand, the crypto currencies are now traded with the introduction of the digital asset. The article here details how these crypto currencies are being traded.
- Enhancement of income: Financial market supports the income to be grown. They help the individuals or the companies or the government to earn money from the invested principal. This, in turn, leads to the growth of the individual welfare, development of the company and the growth of national income.
- Productive usage: The enhancement of the national income and the gross national product is obtained by the productive use of the funds that are being borrowed.
- Capital information: Financial market paves way for the new channel of the country’s capital information.
- Price determination: The interaction between the buyers and the sellers helps to set the price for the financial entities that are being traded. In this way, a transaction is completed successfully.
- Sale mechanism: Financial market provides special mechanisms for the process of trading.
- Information: It even provides the information on varied areas that helps the buyers and the sellers to successfully carry out the transaction with the profit.
- Financial functions:
- Helps the borrower by lending money to perform their desire like personal development or financial development.
- Helps the lenders by providing them the principal and the interest at the needed time with the profit.
- The functioning of the financial market helps to provide liquidity flow in the market.
- Facilitates credit creation.
- Helps promotion of the savings.
- The commercial bank is funded with liquidity.
- Anyone can start an investment with a great investment.
- The economic growth of the nation is balanced.
- The trading floors are upgraded and made easily available for the buyers and the trades for the purpose of trading and transaction.
The components of the financial markets are:
- Based on the level of the
- Primary market
- Secondary market
- Based on the types of
- Money market
- Equity market
- Debt market
- Derivative market
- Financial service market
- Depository market