The capital market consists of suppliers and users, including individuals and entities that trade in financial securities such as bonds and stocks. The main purpose of the capital market is to collect funds from some institutions and provide them to other institutions in need. “Suppliers” in a capital market include organizations and institutions that serve them, such as pension funds, life insurance companies, charitable foundations, and non-financial companies that make more money than they need to invest. "Users" include people who buy homes and motor vehicles, non-financial companies, and governments that finance infrastructure investments and operating costs.
The capital market has several functions and is a measure of the overall strength of the economy.
Capital Markets: Save on Long-Term Investment financing, Activate securities trading, Reduces the cost of transactions and data, Increase the efficiency of investment.
How the capital market can work: A government wants to raise long-term funds to sell bonds in the capital markets. Investment banks are used to organize the sale of these bonds, however, it is more common for governments of large countries to bypass investment banks and obtain their bonds directly through computerized auctions.
Capital Market Examples
The New York Stock Exchange is an example of a highly organized capital market. Other examples include the American Stock Exchange, the London Stock Exchange and the NASDAQ. Other, less organized and formal capital markets include organizations whose bases do not meet the minimum standards of the official exchange, such as the New York Stock Exchange. These institutions still trade, but not through a well-known exchange.