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What are the significant changes made in the capital market in recent years?

Updated: May 11

Economic success depends on the success of the capital market and money market working pattern. However, previously, the capital market and money market structure was not as effective as it is now. But after economic structure modification, investors can invest their money safely in the capital market and money market. But the popularity of the capital market is more than the money market because the capital market can provide considerable returns to the traders. Thus people who want to gain more profit by investing little amount can trade in the capital market safely.

What is the capital market?

A capital market is a financial market where the trading of long-term debt and equity happens. Traders buy and sell their long-term security through the capital market and make a considerable profit.

Governments and large companies prefer to trade through the capital market. Financial regulators monitor the function of the capital market to avoid any types of fraud and mishandling of securities. The financial sector or treasury department generally manages transactions on the capital market.

Significant changes in capital market

Capital market over the world has made significant changes, such as follows-

1. Liquidity- With the help of modern technology, it is easy to liquidate your large amount of investment rapidly. In this way, corporations and governments can raise a large number of capital funds.

2. Separation in risk- Credit risk, scheduling risk, and interest risk are the main factors of the traders' capital market that the traders have to carry. But traders donot want to take these risks. So New technique has been introduced in the financial institution that can judge the credit risk.

3. Security- Traders like government agencies and corporate organizations can trade through a bank. In such a case, banks provide a fixed return to the traders and maintain the economic balance.

Instruments of capital market

The lists of instruments of capital market are as follows-

1. Derivatives

2. Securities that are a general term for stocks exchange investment

3. Shares, bonds, and debentures

4. Government securities

5. Equity share and preference share

From the above information, one can understand that the capital market has a vast diameter where banks, financial institutions, government, and financial regulators involve significantly. Moreover, each of these sectors has its unique involvement in the capital market. Therefore, the success of the capital market depends on their performance.