Before speaking about the financial markets, let’s first introduce the origin of markets. A market is a place where several trading activities take place. The first thing that comes to our mind when we think of any market is the crowd, sellers and buyers, sellers shouting at the top of their voice to sell their wares and customers yelling to get the best deals. It is a place filled with energy and vibrancy. People were self sufficient in the early stages of civilization. Everything they used was made by them, like for example; they used to grow their own food. With the development of civilization people’s needs grew and it was not easy for a person to produce all that he needed by himself. Hence people with different commodities to offer started gathering at a place to satisfy their mutual needs. This is how the markets developed.
A financial market is an organization that will facilitate trading of financial products. The financial products are traded in a number of ways between sellers and buyers. These include the use of stock exchanges between buyers and sellers etc. Various financial instruments are traded in financial markets as the name itself suggests. The level of trade activity varies in nature. At macro level, people with excess money lend it to the people who are interested in investing money in various projects.
Apart from buyers and sellers there is one more player in the financial market. He is the intermediate. In a situation where a person wants to lend his money for certain amount of interest but it is not agreed by the person who wants the money, then an intermediate can convince both of them and can make them agree on common terms. These intermediates have a major role in financial markets. There may be different kinds of Intermediaries but all act as a link to mobilize the finances between both the parties.