DEBT MARKET SIMILARITIES EQUITY MARKET

- Also known as credit market where investors are provided with - Consist of investors publicly - Also known as stock market, is a financial market where shares are
issues/bonds and trading of debt securities. Debt instruments are traded companies, and a issued and traded through exchanges, representing a claim on the assets
assets that typically require the holder to receive regular fixed regulatory body that creates and earnings of a corporation.
payments, often including interest. regulations for the market.
- Primary source of owned capital
- Source for borrowed capital - Help companies raise capital
- Participating in the equity market indicates an interest in owning a portion
of a corporation.
- Participation in debt market is solely a financial interest-earning - Both markets offer investment
investment. opportunities - Investing generally involves taking on significant levels of risk.

- Debt investments typically offer lower potential returns - Usually, people invest in the equity market with the expectation of
achieving higher returns.
- Bondholders do not have any ownership or claim to the future profits
of the borrower, and are only entitled to the repayment of the loan - Investors can claim ownership of the business whose shares they hold,
with interest. giving them the ability to make claims on the future earnings.

- Tends to yield returns over a relatively shorter period of time. - Returns tend to accrue over a longer period of time.

- The returns earned from investments are in the form of interest - Earnings from investments typically come in the form of dividends
payments

PRIMARY MARKET SECONDARY MARKET

PURPOSE: The primary market is used for raising new capital. SECURITIES: Both are markets deal PURPOSE: Secondary market is used for buying and selling existing
with securities such as stocks and securities.
PLAYERS: In the primary market, the issuer and the underwriter are the bonds.
main players. PLAYERS: In secondary market, investors and traders are the main players.
REGULATIONS: Both are subject to
PRICE: In the primary market the price of the security is usually fixed by regulations to ensure fair trading PRICE: In the secondary market, the price is determined by the forces of
the issuer or underwriter. practices and protect investors supply and demand.

VOLUME: Primary market typically has lower trading volume. INFORMATION: Investors in both VOLUME: In secondary market, new securities are issued infrequently.
require access to reliable information
about the securities they are buying
for selling.

LIQUIDITY: Both markets provide

liquidity to investors, allowing them to
buy and sell securities easily.
 MONEY MARKET CAPITAL MARKET
DEFINITION: Short-term debt securities having a maturity of up to one - deals with financial asset. DEFINITION: Capital market is a market for long-term securities having a
year are traded in the money market. maturity of more than a year.
- provide source of financing
PARTICIPANTS: Financial institutions and businesses typically use the PARTICIPANTS:
money market to meet their short-term funding needs. - both involves risk Companies, governments, and people all use the capital market to raise long-
term money.
INSTRUMENTS: Short-term instruments like treasury bills, commercial - they influence economy
paper, certificates of deposit, and bankers’ acceptances are traded on the INSTRUMENTS: Bonds, equities and preference shares are examples of
money market. - provide investment opportunities long-term instruments traded in the capital market.

RISK AND GAIN: the money market is typically seen as a low-risk, low RISK AND GAIN: Capital market is viewed as a high-risk market with
return market. potential for bigger rewards.

LIQUIDITY: because of the money market's great liquidity the items LIQUIDITY: Capital market is less liquid which means that the instruments
traded there can be quickly transformed into cash exchanged here may not be readily convertible into cash.

CASH MARKETS FUTURES MARKET

DEFINITION: Cash market is a market where financial instruments such - The cash market and futures DEFINITION: Futures market is a market where participants trade
as stocks, bonds, currencies, commodities, etc. are bought and sold for market are to distinct financial standardized contracts for the future delivery of a particular underlying asset
immediate delivery and payment. markets. Both cash and futures such as commodities, currencies, indices, and stocks.
market allow traders to buy and
TIMING: In the cash market, transactions take place in real-time and sell financial instruments such as TIMING: In the futures market, trades are agreed upon today but settle on a
settlement of trades occurs within a few days of the transaction. stocks, bonds, commodities, and future date, usually months in the future.
currencies.
RISK AND REWARD: In the cash market, traders can earn returns by - Both markets provide transparent RISK AND REWARD: In the futures market, traders can make profits by
buying an asset at a low price and selling it at a higher price. The potential pricing and trading information, correctly predicting the future price movements of an asset. The potential for
for profit is limited to the difference between the buying and selling price allowing investors to make profit (and loss) is much higher than in the cash market, as traders can you
informed decisions. use leverage to increase their exposure to the underlying asset.
LIQUIDITY: The cash market is generally more liquid than the futures - Both markets provide a platform
market because transactions are settled immediately and the volume of for price discovery, where buyers LIQUIDITY: The futures market, on the other hand, is less liquid, as trades
the trading is generally higher. and sellers come together to takes place in standardized contracts with fixed terms and conditions.
determine the market price of a
HEDGING: The cash market is not used as much for hedging as trades financial instrument. HEDGING: The futures market is used extensively by investors for hedging
are settled in real-time and typically involve a short-term investment purposes, where they use futures contracts to protect against adverse price
horizon movements in the underlying asset.
 EXCHANGE TRADED MARKETS OVER THE COUNTER MARKETS
- Exchange Traded Markets (ETMS) are financial markets where - Both markets are used for buying - Over-the-Counter (OTC) market is a decentralized financial market
buyers and sellers come together to trade securities such as stocks, and selling financial instruments, where buyers and sellers trade securities directly with each other through
bonds, and derivatives through a centralized exchange. such as stocks, bonds, and a broker-dealer.
derivatives.
- Exchange Traded Market (ETMS) have a physical location in the form - Over-the-Counter markets (OTCS) do not have a physical location as
of a centralized exchange where securities are bought and sold. - Both markets are subject to trades are conducted directly between buyers and sellers often through
regulatory oversight. electronic networks or phone communication.
- Prices of securities in ETM are determined through the supply and
demand of the market. - Both markets are used by - Prices of securities in OTCM are negotiated between buyers and sellers.
investors to trade securities and
- Liquidity is higher in ETMS because they have a centralized market to raise capital - Liquidity in OTCMS can be lower, as buyers and sellers must locate each
place, which makes it easier for buyers and sellers to find each other. other through brokers or other intermediaries.

- Exchange traded markets primarily trade publicly traded stocks - Over-the-counter market tend to trade more complex instruments such
as structured products and private securities.
- Transparency is great in ETMS since all trades are publicly reported
and prices are readily available to investors. - In over-the-counter markets, transparency can vary depending on the
specific market and security being traded, but generally, prices and
- Users of exchange traded markets include individual and institutional trades may not be publicly disclosed, and information can be less readily
investors, traders, and companies looking to raise capital through available to investors.
public offerings
- Users of over-the-counter market tend to be institutional investors, retail
investors, and companies looking to raise capital through private
placements or issue securities that do not meet listing requirements of
formal exchanges