Equity Markets

Equity markets are a segment of the financial markets where shares of publicly traded companies are bought and sold. These markets play a crucial role in facilitating the flow of capital between investors and businesses, enabling companies to raise funds for growth and expansion, while providing investors with the opportunity to participate in the ownership and potential profits of these companies.

Types of Equity Markets

There are various types of equity markets, each with its own characteristics and regulations:

• Primary market: Where new shares are issued and sold by companies to raise capital. Investors can purchase these shares through initial public offerings (IPOs) or subsequent public offerings.
• Secondary market: Where existing shares are traded between investors. The most well-known secondary market is the stock exchange, where buyers and sellers meet to determine prices and execute trades.
• Over-the-counter (OTC) market: Where shares of companies not listed on exchanges are traded directly between dealers or through electronic networks.

Participants in Equity Markets

Various participants interact in equity markets, including:

• Investors: Individuals or institutions that buy and sell shares, such as retail investors, institutional investors, and hedge funds.
• Brokers: Intermediaries who execute trades on behalf of investors. They provide access to the market and handle the settlement process.
• Market makers: Firms that provide liquidity by quoting bid and ask prices for shares, facilitating trading and reducing price volatility.
• Exchanges: Regulated platforms where shares are listed and traded, ensuring transparency, fairness, and efficient price discovery.

Functions of Equity Markets