The most basic function of financial market

The most basic functions of financial markets are as follows:

The most important and basic function of financial market is to finance monetary funds.

Financial market refers to the financing market, which is a market where both the fund supplier and the fund demander trade through credit instruments. Broadly speaking, it is a market that realizes currency lending and financing and handles all kinds of bills and securities trading activities. A relatively perfect definition of financial market is that financial market is a mechanism for trading financial assets and determining their prices.

The financial market can gather many investors' willingness to buy and sell, which greatly increases the success rate of a single investor's transaction, that is, under the premise of accepting the market price, the buyer of securities can buy as much as he wants, and the seller can sell as much as he wants. This property of the exchange is actually liquidity. The liquidity of the exchange enables capital to be transferred between different times, regions and industries, thus realizing the allocation of resources.

The purpose of financial markets is to facilitate transactions, so liquidity is the basic economic function of financial markets. Without the function of centralized liquidity, the financial market will lose its foundation of existence. The role of liquidity is not only here, but also reflected in the decisive role of the market as a transaction cost in the selection and change of trading mechanism, because in the era of world economic integration, various financial markets are facing fierce competition, and liquidity is the most direct embodiment of their competitiveness.

Extended data:

A complete financial market has the following four basic elements:

1. Supply and demand side of funds: including government, financial institutions, enterprises and institutions, residents, foreign businessmen, etc. , both to provide funds to the financial market, but also to raise funds from the financial market. This is a basic factor in the formation and development of financial markets.

2. Credit instruments: this is the object of loan capital transactions in the financial market. Such as various bonds, stocks, bills, negotiable certificates of deposit, loan contracts, mortgage contracts, etc. , is the object that financial market investment and financing activities must rely on.

3. Credit intermediary: This refers to some institutions that act as intermediaries between the supply and demand sides of funds and play the role of contact, intermediary and buying and selling on behalf of customers, such as banks, investment companies, stock exchanges, securities firms and brokers.