Structure of financial marketsFinancial markets can be classified on the basis of several parameters: thenature of the financial securities traded (primary versus secondarymarkets), forms of organisation (organised exchanges versus over-the-counter markets), maturity of the financial instruments traded (capitalmarkets versus money markets), and forms of trade intermediation (quote-driven dealer markets, order-driven markets and brokered markets).Primary and secondary marketsA primary market is a financial market in which new issues of financialsecurities (both bonds and stocks) are sold to initial buyers. A secondarymarket is one in which securities that have been previously issued can beresold. Primary markets facilitate new financing to corporations, but mostof the trading takes place in the secondary markets. Although some commentators have argued that secondary markets are lessimportant to the economy than primary markets, they serve two importantfunctions. First, they make financial securities more liquid. The
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