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Financial Markets – What Is a Market?

A market is a collection of economic arrangements, systems, procedures, interpersonal relationships or infrastructures through which different parties exchange goods and services for payment. In simple terms, it is where goods and services are bought and sold. While traditional markets depend mainly on barter exchanges, modern markets include electronic means and networks that make the process of buying and selling convenient and automated. Although markets have various definitions and names, they share the same characteristics that an enterprise needs to function. The most important characteristic of any market is that it is a venue through which goods and services are exchanged. Goods and services traded in the market include financial assets, such as money and bonds; tangible assets, such as lands, buildings and equities; intangible assets, such as licenses and intellectual property rights; and services, such as professional services and accounting services.


Banks play an important role in the supply of securities in the market. They are the main clearing houses that complete transactions between buyers and sellers. In some countries, a deposit account is required as a proof of identity and a guarantee of funds before transactions are completed. Banks also provide services such as making loans and buying securities from and exchanging securities with other banks and financial institutions. In addition, banks also participate in the exchanges, where they buy and sell securities to other participants.

The bond market place, also called the foreign exchange market place, is the physical location where trading takes place. The bond market place is the location where buyers and sellers meet and decide how much they will pay for a particular security or how much they will allow a seller to purchase securities for them. The primary role of the bond market place is to ensure fair and balanced trading by maintaining orderly bidding and asking prices. The central market place or the exchange is the place where trading is performed. There are several submarkets within the exchange market.


The interest rate is the primary factor that influences the bond market place. The selling rates of securities are determined by factors such as the amount of time until maturity, the risk level and the credit rating of the borrower. When rates rise, the sellers offer higher prices and attract more buyers. When rates fall, the sellers reduce their prices and attract fewer buyers.

Short term may refer to a day, a week or a month. A long term may refer to a year or a decade. While the term may vary, the underlying trend remains the same. Traders look to determine whether the price of a security will rise or fall in relation with other factors that influence the market.


Financial markets, including the bond market, are affected by the economic factors that affect the world. The interaction of the financial markets occurs through exchanges, where one type of security is sold to another. The exchanges include stock exchanges, futures exchanges, currency exchanges and mortgage marketplaces. These exchanges help participants in the market determine the value of particular securities. The analysis of market forces can give information on the economic policies that will affect markets, as well as the conditions that encourage trading.

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