Capital markets are an integral part of the global financial system, providing a wide range of services to individuals, businesses, and governments. By offering efficient channels for the exchange of funds, capital markets allow for the efficient utilization of capital and provide growth opportunities for businesses. They facilitate investments, collect capital for corporate needs, and provide liquidity for investments.

Primary markets refer to the direct issue of securities from the issuer. These issues are usually limited to large institutional investors and selected wealthy investors. This market allows companies to raise new capital for expansion and operations, allowing them to grow and generate wealth. Companies also use this market to reduce debt and raise equity capital for their operations.

Secondary markets provide the medium for investors to buy and sell securities issued by companies. These markets are open to all investors and allow a quick sale of investments. Investments are made only after all the due diligence is completed. These markets operate mainly through intermediaries, such as brokerage firms and investment banks.

Transactions in capital markets are conducted over-the-counter (OTC) or through exchanges. OTC transactions involve two parties negotiating and concluding a deal outside a regulated exchange, while exchange transactions take place within a specific regulated forum. Transactions on exchanges are easier as they offer a continuous trading market throughout the day, with a more transparent pricing for buyers and sellers.

Capital markets are highly regulated to protect investors’ interests and allow for orderly trading. All the countries across the world have enforced numerous rules, regulations, and supervision to make sure the capital markets are efficient, safe, and transparent.

In conclusion, capital markets are a crucial part of the world finance system, providing efficient channels for the exchange of funds and allowing for efficient utilization of capital. With efficient policies and regulations in place to protect investors, capital markets have become an indispensable tool for economic growth.