These are the some function of the financial markets Borrowing and Lending
Financial markets channel funds from households, firms, governments and foreigners that have saved surplus funds to those who encounter a shortage of funds (for purposes of consumption and investment)
Price Determination
Financial markets determine the prices of financial assets. The secondary market herein plays an important role in determining the prices for newly issued assets Coordination and Provision of Information
The exchange of funds is characterized by a high amount of incomplete and asymmetric information. Financial markets collect and provide much information to facilitate this exchange.
Risk Sharing
Trade in financial markets is partly motivated by the transfer of risk from lenders to borrowers who use the obtained funds to invest Liquidity
The existence of financial markets enables the owners of assets to buy and resell these assets. Generally this leads to an increase in the liquidity of these financial instruments
They make it possible for people corporations and government units to raise capital. They help allocate capital toward productive uses. They provide an opportunity for people to increase their savings by investing. They reveal investors' judgements and potential earning capacity of corporations, thus giving guidance to corporate managers. They generate employment and income.
In economics, a financial market is a mechanism that allows people to easily buy and sell (trade) financial securities (such as stocks and bonds), commodities(such as precious metals or agricultural goods), and other fungible items of value at low traction cost and at prices that reflect the efficient-market hypothesis.
In economics definition "a financial market is a process that allows people to easily buy and sell financial securities, commodities and other fungible items of value at low transaction costs and at prices that reflect efficient markets." Financial markets have come up over several hundred years and are undergoing constant innovation to improve liquidity in a better manner. There function is to facilitate people economy in one way or the other. It is all about financial facilitation for people. Both general markets, where many commodities are to be traded and specialized markets where only a single commodity is to be traded exist. Markets work by placing many interested sellers at one location, thus making them easier to find for available buyers. An economy which relies basically on interactions between buyers and sellers to allocate resources is called a market economy in contrast either to a command economy available or to a non-market economy available that is based, such as a gift economy, for instance. Hope it must be clear now!
The primary function of the financial market is to allow the transference of funds from one party to the other. Financial markets help in the flow of funds and they are responsible for transferring the funds from those who have excess funds to those who need funds. In this way financial markets help in improving the economic efficiency. Financial markets can also increase the investment opportunities for those who need to apply their skills and they the benefits to those who want to earn something on their idle money. In this way financial markets play a very essential role in the economy.
Financial market serve as liquidity adjustment in the economy, it provides a bridge by which the saving of surplus units may be transformed into longer term investment for deficit units.
