Securities include stocks and bonds, and commodities include financial instruments bonds derivatives stocks pdf metals or agricultural products. Another common use of the term is as a catchall for all the markets in the financial sector, as per examples in the breakdown below. Secondary markets allow investors to buy and sell existing securities.
The transactions in primary markets exist between issuers and investors, while secondary market transactions exist among investors. Liquidity is a crucial aspect of securities that are traded in secondary markets. Liquidity refers to the ease with which a security can be sold without a loss of value. Securities with an active secondary market mean that there are many buyers and sellers at a given point in time. Financial markets attract funds from investors and channel them to corporations—they thus allow corporations to finance their operations and achieve growth.
Without financial markets, borrowers would have difficulty finding lenders themselves. They can then lend money from this pool of deposited money to those who seek to borrow. More complex transactions than a simple bank deposit require markets where lenders and their agents can meet borrowers and their agents, and where existing borrowing or lending commitments can be sold on to other parties. The lender temporarily gives money to somebody else, on the condition of getting back the principal amount together with some interest or profit or charge. Many individuals are not aware that they are lenders, but almost everybody does lend money in many ways.