Next video:
Loading the player...

Capital markets channel savings and investments between suppliers of capital, such as retail investors and institutional investors, to users of capital like businesses, governments and individuals. They do this by selling financial products like equity and debt securities. Equity securities, also called stocks, are ownership shares in an organization. Debt securities, such as bonds, are interest-bearing IOUs.

Capital markets include primary markets and secondary markets. In primary markets, new stock and bond issues are directly allocated to institutions, businesses or individual investors. In secondary markets, existing securities are traded in organized and often regulated markets like the NYSE or NASDAQ. 

Capital markets are concentrated in financial centers such as New York, London, Singapore and Hong Kong. Because capital markets move money from people who have it, to organizations that need it for productive uses, they are critical to the effective functioning of a modern economy.

TV-Tech is a start-up company and is looking for investors to fund their new product, a combination TV & Watch device. Alice, a venture capitalist, believes this new company will be a great success and decides to buy 20% of the start-up directly from the founders. This transaction, because it lacks a regulated market, would take place in the primary market. If TV-Tech then goes public and is listed in an exchange like the NYSE or the NASDAQ, then buying and selling shares of TV-Tech from its original investors would take place in the secondary market. 

 

Related Articles
  1. Insurance

    Brokerage Functions: Underwriting And Agency Roles

    Learning about these various activities can give insight into how securities are issued and traded.
  2. Managing Wealth

    Issued share capital versus subscribed share capital

    Subscribed share capital is very different from issued share capital, which is the actual issued stock.
  3. Small Business

    Does Your Startup Need Venture Capital Money?

    Venture capital funding provides capital to grow a business. However, entrepreneurs will also lose some control over business decisions.
  4. Investing

    Target Corp: WACC Analysis (TGT)

    Learn about the importance of capital structure when making investment decisions, and how Target's capital structure compares against the rest of the industry.
  5. Financial Advisor

    Being a venture capitalist: A how-to guide

    So you want to be a venture capitalist? Learn what it takes, find out what you need to know, where to start, and what kind of life you will need to take in the world of venture capitalism.
  6. Small Business

    How Venture Capital Will Change in 2016

    Venture capitalists face a tech bubble on the horizon, along with an influx of new non-traditional investors via Wall Street and crowdfunding platforms.
  7. Investing

    American Capital Sells Itself to 2 Companies

    Prominent business development company American Capital (NASDAQ: ACAS) is soon to be no more. The company has agreed to sell its assets to a pair of peers, fellow BDC Ares Capital (NASDAQ: ARCC) ...
  8. Investing

    Why Do Companies Choose NASDAQ for Their IPO?

    The NYSE is known for its prestige so why do some companies opt to list on the NASDAQ instead?
  9. Small Business

    Investor Info for Internet-Based Tech Startups 

    With all the empty startup hype and vast number of options out there, how do you sift through the noise to find the best startups to consider for investment? Start here.
Hot Definitions
  1. Return on Assets - ROA

    Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets.
  2. Fibonacci Retracement

    A term used in technical analysis that refers to areas of support (price stops going lower) or resistance (price stops going ...
  3. Ethereum

    Ethereum is a decentralized software platform that enables SmartContracts and Distributed Applications (ĐApps) to be built ...
  4. Cryptocurrency

    A digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of ...
  5. Financial Industry Regulatory Authority - FINRA

    A regulatory body created after the merger of the National Association of Securities Dealers and the New York Stock Exchange's ...
  6. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs are often issued by companies seeking the capital to expand ...
Trading Center