What are the 4 types of stock market?
There are different ways to classify the stock market, but one common way is based on the types of securities traded. The four main types of stock market are:
- Primary Market: This is where new securities are issued and sold to investors for the first time. Companies raise capital by issuing stocks or bonds to the public or institutional investors. Examples of primary market transactions include initial public offerings (IPOs), follow-on offerings, and private placements.
- Secondary Market: This is where securities that have already been issued are bought and sold among investors. The secondary market provides liquidity to investors, allowing them to easily buy and sell securities without the need to directly deal with the issuer. The most popular secondary markets are stock exchanges, such as the New York Stock Exchange (NYSE), NASDAQ, and Tokyo Stock Exchange.
- OTC Market: The OTC (over-the-counter) market is a decentralized market where securities are traded directly between two parties, without the need for a formal exchange. The OTC market includes securities that are not listed on major stock exchanges and are traded through dealers or brokers. Examples of OTC securities include penny stocks, bonds, and derivatives.
- Futures Market: This is where standardized contracts to buy or sell a specific asset, such as commodities or financial instruments, are traded for future delivery. Futures markets are used by traders and investors to manage risk or speculate on the future price of an asset. Examples of futures markets include the Chicago Mercantile Exchange (CME) and the New York Mercantile Exchange (NYMEX).