What Is a Financial Market?

A financial market is a broad term describing any marketplace where trading of securities including equities, bonds, currencies, and derivatives occur. Some financial markets are small with little activity, while some financial markets like the New York Stock Exchange (NYSE) trade trillions of dollars of securities daily.

Financial market prices may not indicate the true intrinsic value of a stock due to macroeconomic forces like taxes. In addition, the prices of securities are heavily reliant on informational transparency to ensure efficient and appropriate prices are set by the market.

The stock market is a financial market that enables investors to buy and sell shares of publicly traded companies. The primary stock market is where new issues of stocks are first offered. Any subsequent trading of stock securities occurs in the secondary market.