Functions of Capital Market Institutions - SS2 Economics Lesson Note
Capital market institutions play an important role in facilitating the flow of capital from investors to businesses and governments that need funding. Some of their key functions include:
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Providing a platform for buying and selling securities: Capital market institutions provide a platform for investors to buy and sell securities, such as stocks, bonds, and derivatives. This is the primary function of capital market.
Facilitating capital raising: Companies and governments can raise capital by issuing securities on the capital markets. Capital market institutions help to connect these issuers with potential investors.
Pricing securities: Capital market institutions help to determine the market prices of securities through the forces of supply and demand.
Providing liquidity: Capital market institutions provide liquidity to investors by enabling them to buy and sell securities quickly and easily.
Managing risk: Capital market institutions provide various risk management tools, such as derivatives, that help investors to manage their exposure to different types of risks.
Providing investment advice: Capital market institutions offer investment advice to investors, helping them to make informed investment decisions.