A financial market is a place/platform in which financial instruments are created through financial intermediaries and/or transferred as a financial service to respective customers/ investors. These instruments represent a claim to the payment of certain amount of money at some specified or unspecified time in the future. The functions of the financial market are as follows:
(i) Information dissemination - As a platform for buying and selling financial instruments between buyers and financial instruments detailed informationd sellers, it disseminates The information inclut their trading activity. financial intermediades all the details of the instruments along with providing financial in the past and in real-time to make informed decisions by current and new investors.
(ii) Price discovery- It also facilitates price discovery which is used to determine current market prices of a financial instrument depending upon the demand and supply for those instruments
(iii) Liquidity - These markets consist of different kinds of financial instruments for different time frames thus enabling availability of money in the short-run and in the long-run. Accordingly, these markets provide liquidity where investors can invest their money in any type of instrument they desire
(iv) Reduces transaction costs: Financial market helps to save time, efforts and money that both buyers and sellers of a financial asset would have to otherwise spend to try and find each other, thus, reducing the cost of transactions.
(v) Mobilises savings - Financial markets boost people into utilising their savings in investments to obtain higher retums. Accordingly, it provides several financial instruments which can be transferred across the investment network.