Classification of securities markets

Securities market or stock market is the aggregate of economic relations, which are formed during the issue and circulation of stocks. The market redistributes financial resources through its participants, who play a role, to a certain degree, in economic conditions of many countries. By their activities, major players can cause a panic in the market, thus leading to the fall of stock prices and financial crisis.

The securities market is a complex structure which can be classified according to various features characterizing the organization of a trade or the relation between market participants. The main features by which securities market can be classified are:

By the organization of a trade

The stock market of securities is an organized market, where the buy/sell operations of stocks take place in accordance with rules established by an exchange. Only the shares of listed companies are issued to the exchange market;

The over-the-counter market of securities is an unorganized market, where the conditions of transactions are agreed with the buyer and the seller. In the OTC market, the stocks of issuers, who have not been listed or do not have the desire to be listed on an exchange, are circulated.

By the stages of the issue and circulation of stocks

The primary market is a market, where occurs an initial offering of stocks. The initial offering can be either private or public (IPO -initial public offering). In the first case, the stocks are bought by certain number of persons without the disclosure of financial information. In the second case, the offering takes places through intermediaries with published financial indicators.

The secondary market is a market, where the already issued stocks are being resold. The main participants of the market are speculators, who make money on the difference between the buying and selling prices of stocks. 

By geography

National – stock market within a certain state, where occurs the redistribution of its financial resources between economic agents.

Regional – a market in a specific region with a closed circulation. Regional market can be formed within one country, but it can also combine some national markets.

International – a world market where occurs the turnover of securities between various countries and regions, thus providing transfer of the capital between them.

By issuers

Government securities market – a market of circulation of government debt securities issued mainly for the repayment of the deficit of the state budget or government projects.

Corporate securities market – commercial enterprises act as issuers.

By the types of transactions

Cash market – a market of immediate execution of transactions (up to two working days);

Spot Market – a market of derivative securities with delayed execution of transactions.

By the way of trading

Traditional market – trades on an exchange take place directly between the seller and the buyer;

Computerized market – trades are conducted through computer networks with the availability of a stock trading terminal.

At this stage of development of securities market through a worldwide network, trading is available to almost everyone. Trading terminals allow to follow the course of trading on an exchange in real – time and make transactions with any stock.