What is the Importance of Financial Markets?

A financial market is a place where various financial securities are traded. This is a platform for buyers and sellers of financial securities to meet and satisfy each other’s requirements. The products that are traded in these markets include stocks, bonds, currencies and derivatives. These markets are of two types namely, primary and secondary. The primary market is a market where the initial public offering of shares of a company is done. The secondary market is the one where the company gets listed on the stock market and the shares are made available to the general public to trade. These markets play an important role in the flow of funds in the economy and provide various other benefits which are mentioned in the article. Capital Formation The key importance of financial markets is that they help in forming capital for the economy. The market does this by issuing various products such as stocks, bonds, treasury bills, etc.  Risk Diversification Another significant benefit offere