what are capital markets 
capital markets are those where savings and investments are channeled between suppliers and those in need suppliers are people or institutions with capital to lend or invest they typically include banks and investors those who seek capital in this market are businesses governments and individuals the most common capital markets are the stock market and the bond market they seek to improve transactional efficiencies by bringing suppliers together with those seeking capital and providing a place where they can exchange securities yurle villegas investopediaunderstanding capital marketsthe term capital market is a broad one that s used to describe the in person and digital spaces in which various entities trade types of financial instruments these venues can include the stock market the bond market and the currency and foreign exchange forex markets most markets are concentrated in major financial centers such as new york london singapore and hong kong 1capital markets are composed of the suppliers and users of funds suppliers include households through the savings accounts and products they hold with banks as well as institutions such as pension and retirement funds life insurance companies charitable foundations and nonfinancial companies that generate excess cash the users of the funds distributed on capital markets include home and motor vehicle purchasers nonfinancial companies and governments financing infrastructure investment and operating expenses capital markets are used primarily to sell financial products such as equities and debt securities equities are stocks that represent ownership shares in a company debt securities such as bonds are interest bearing ious these markets are divided into two categories capital markets are a crucial part of a functioning modern economy because they move money from the people who have it to those who need it for productive use primary vs secondary marketscapital markets are composed of primary and secondary markets a company engages in the primary capital market when it publicly sells new stocks or bonds for the first time such as in an initial public offering ipo this market is sometimes referred to as the new issues market the company that offers the securities hires an underwriting firm when investors purchase securities on the primary capital market the firm reviews it and creates a prospectus outlining the price and other details of the securities to be issued all issues on the primary market are subject to strict regulation companies must file statements with the u s securities and exchange commission sec and other securities agencies and they must wait until their filings are approved before they can go public 3small investors are often unable to buy securities on the primary market because the company and its investment bankers want to sell all the available securities in a short period to meet the required volume they must focus on marketing the sale to large investors who can buy more securities at once marketing the sale to investors can often include a roadshow or a dog and pony show in which investment bankers and the company s leadership travel to meet with potential investors and convince them of the value of the security that s being issued the secondary market includes venues overseen by a regulatory body like the sec where these previously issued securities are traded between investors issuing companies don t have a part in the secondary market the new york stock exchange nyse and nasdaq are examples of secondary markets the secondary market has two categories the auction and the dealer markets the auction market is home to the open outcry system where buyers and sellers congregate in one location and announce the prices at which they re willing to buy and sell their securities the nyse is one such example people trade through electronic networks in dealer markets most small investors trade through dealer markets 