Financial market

A financial market is a market in which individuals trade financial securities and derivatives with minimal transaction costs. This kind of market is known as a financial exchange. In the context of the financial markets, the terms "commodities" and "equities" are used interchangeably to refer to raw materials and precious metals, as well as stocks and bonds.

The name "market" is frequently used for what are more strictly exchanges, organisations that enable the trading in financial assets, such as a stock exchange or commodities exchange. However, they are not really markets in the traditional sense of the word. This may be a physical site, such as the New York Stock Exchange (NYSE), London Stock Exchange (LSE), JSE Limited (JSE), or Bombay Stock Exchange (BSE), or it can be an electronic system, such as NASDAQ. There is a significant amount of stock trading that takes place on an exchange; however, corporate actions (such as mergers and spinoffs) take place outside of an exchange, and any two companies or people, for whatever reason, may agree to sell the stock from one to the other without using an exchange.

The majority of currency and bond transactions take place on a bilateral basis; however, some bonds are traded on stock exchanges, and computerised trading platforms for these types of transactions are also being developed for use on stock markets. There are also worldwide efforts such as the United Nations Sustainable Development Goal 10, which includes an objective to strengthen the regulation and monitoring of global financial markets. Another example of a global initiative is the Global Financial Stability Report.

The phrase "financial markets" is often reserved, when used by those working in the finance industry, to refer to just those markets that are used in the process of capital formation. Markets for long-term investments are often referred to as capital markets, whereas markets for short-term investments are sometimes referred to as money markets. Loans with terms of one year or less are typical in the money market, which specialises in short-term credit.