How financial markets work
Buyers, sellers, exchanges, brokers, market makers, and price discovery.
How financial markets work
A financial market connects people and institutions that want to buy, sell, issue, hold, or finance assets. Prices emerge from competing orders, available liquidity, information, expectations, and market rules.
| Concept | Explanation | |---|---| | Investor | Allocates capital and accepts risk in pursuit of return or another objective. | | Issuer | Creates securities or tokens to raise capital, distribute ownership, or support a network. | | Broker | Routes customer orders and provides access to trading venues. | | Exchange | Operates a marketplace and applies listing, matching, surveillance, and settlement rules. | | Market maker | Quotes both buy and sell prices to support liquidity. | | Clearing and settlement system | Transfers cash and ownership after a trade. | | Validator or miner | Helps verify and order blockchain transactions, depending on the network. |
Key idea: A market is not a single opinion. It is a continuous process that matches many participants with different objectives, time horizons, and information.