Question

What is the primary role of financial markets? and what people and institutions interact in these markets?

Answer 1

The primary role of financial market is to provide a platform through which borrowers and investors can interact with each other. The primary function that is performed by the financial market is that they act as an intermediary where they provide a transparent platform where investors people who save and people who wants to borrow funds to invest can interact with each other at while reducing the cost of transaction. An efficient Financial market is considered very important from the perspective of an economy as it significantly contributes to the growth and development of the country. The financial market is also considered equivalent to the growth of the economy, large stock exchanges of countries like US NASDAQ, NYSE, the bigger the stock exchange, the bigger is considered to be the economy and stock market is also considered to be a leading indicator of the economy. There are many participants who interact with each other like financial institutions like Banks, mutual funds, hedge funds, pension funds corporates who wants to raise funds by issuing equity or debt, retail investors, institutional investors and large high net worth individual investors and many more. All these investors interact with each other and provide liquidity to the market while benefitting from the over all growth of the economy.