Question

What kinds of securities are available in the capital markets? How are the worldwide security markets organized?

Answer 1

Capital market is the place where investors put in their money for long term investments so that they can earn more money in the long term. The different kinds of securities available in capital markets are:

a) Equity securities and

b) Debt securities

Equity securities are the investments in stocks of different companies while debt securities are investments in bonds and debentures. There is a certain amount of risk involved in both these types of securities. The risk is comparatively higher in case of equity securities than in debt securities.

Everywhere around the world, the securities market is divided into two. One is the Primary market and the other is the Secondary market. Primary market is the place where the company sells its stocks in the market. In other words, primary market is meant for introduction of IPOs or Initial Public Offering. The Secondary Market is involved in the buying and selling of stocks among buyers and sellers. It has been noticed that there are large number of buyers and sellers in the market who have the only intention of earning more money. Thus, there is also the possibility of more scams and money laundering cases. In order to avoid this, several regulatory bodies have been created and they have the power to supervise the functioning of these markets. As the name suggests, a company will first have to introduce their shares through IPO in Primary market and later the stocks of the company will be traded in the secondary market.