Financial Markets: Definitions, Types, And Functions

Types of Financial Markets
It is customary to distinguish financial markets according to several criteria, the main of which is the type of instrument traded on this market and the method of conducting trading operations. Any person, sometimes without even knowing it, is a participant in a financial market. In this article, we will discuss the types of financial markets that depend on the instruments traded on them.

Currency Market
The financial instrument in this market is the currency that market participants buy/sell. These can be banks, brokerage companies, private traders, etc. Operations in the exchange markets are divided into deposit-credit and conversion. One of the segments of the foreign exchange market is the Forex market. The following operations are carried out in the foreign exchange market:

●       Speculation;

●       Hedging;

●       Transfer of purchasing power;

●       Interest rate arbitrage.

Commodity Market
In this market, people trade such materials as oil, natural gas, coal, agricultural products, non-ferrous and ferrous metals, etc.

Precious Metals’ Market
It is a segment of the commodity market. But due to recent rapid development, it is customary to separate it into a separate category. The development of the precious metals’ market is due to the instability of world currencies and the fact that investors are increasingly placing their funds in this market. The multifunctionality of the precious metals’ market is related to the fact that they are not only a universally recognized financial asset and the safest way to reserve free cash, but also a valuable commodity for several manufacturing enterprises.

Stock Markets
Participants in the stock market are issuers (they issue securities to raise funds), investors (they buy these securities), and intermediaries (persons who provide interaction between issuers and investors). The stock market has huge trading volumes and is divided by territorial characteristics. There is a stock market in America, Europe, Russia, etc. This market is most susceptible to financial engineering, which is the process of focused development of new financial instruments and new schemes for financial transactions. If you are interested in stock trading, you should visit alpari.org, which provides great conditions for trading.

Insurance Market
There are various insurance services as objects of purchase/sale on the insurance markets. The demand for the services of this market increases significantly as market relations develop.

Credit Market
Objects of the credit market are credit resources and financial institutions serving them. Credit market participants are the state, banks, population, enterprises, credit organizations, etc.

Exchange Sites
Trading occurs at certain platforms. For the purchase/sale of goods, a prerequisite is the presence of a counterparty on this site. The working hours of stock exchanges are called sessions. Because of this, the main inconvenience of exchange platforms arises. Since each platform trades a certain type of product, you can only buy/sell this product on this platform and, accordingly, at a certain time. Exchange platforms specialize in such market segments as metals, energy, raw materials, etc.

OTC Markets
The main advantage of OTC markets is that they can be traded via the Internet or by telephone. One of the most characteristic representatives of the OTC markets is the Forex currency market.

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