What You Need to Know about Capital Markets
Among the many different financial markets, capital markets are where people sell, buy and trade long-term debts. Securities that are backed by equity are also handled in this market. All over the world, countries participate is capital markets and each of those countries have different agencies that provide oversight for the capital market. It is the Securities and Exchange Commission that oversees the capital market in the U.S. The SEC prevents fraud and keeps the market a safe place to do business.
Capital Derivatives markets, in today's modern world, are all computer based. The majority of the platforms can only be used by professionals within the financial industry. There are a few, however, that the public has access to. The number of capital market platforms is in the hundreds. Financial institutions and stock exchanges are a couple of the agencies that host these computer-based platforms. However, the actual companies that host these virtual platforms can often be found in one of the big financial centers of the world.
Capital markets are divided into two categories: primary and secondary markets. In the primary market, investors can buy stocks and bonds through a process known as underwriting. It is big companies as well as the government that use the primary markets most often. Sometimes wealthy individual trade, sell and buy in the primary market but that is an extremely rare occasion. Secondary markets (where securities are dealt with) actually make entities more willing to do business in the primary market. The secondary market is a place entities can make quick cash off the investments they made in the primary market if it comes to that. Read http://en.wikipedia.org/wiki/Financial_services to know more about financial services.
You've probably heard of money markets and are wondering how they differ from capital markets. Money markets are primarily used as a way to get short term financing. If a company is in need of loan and expects to pay it back within a day or two, the money market is where they should go looking for cash.
The money market is usually where calypso consultants find the money to cover the expenses that occur just from operating. For example a company may need to fix a down machine but won't have the money until the accounts are paid at the end of the month. That company would head over to the capital market. However, another company might want to expand their factory space, to accommodate more machines for example. In a situation like that, it would be best to go to the capital market. Companies and other entities do not expect to see dime from the investments made in the capital market for at least a full year. You should not confuse bank lending with operating in the capital market.
