The Stock and Bond Markets
This article discusses over-the-counter (OTC) markets and their role within the primary and secondary markets we discussed earlier. OTC markets are not subject to the same regulations as primary markets. OTCs are considered secondary markets, like stock exchanges such as the New York Stock Exchange (NYSE). These two secondary markets differ in that OTCs are decentralized markets, like NASDAQ, while stock exchanges are centralized and allow traders to meet and conduct their trading activities. What are the different financial markets?
Stock and Bond Markets
A large portion of the capital market is represented by the stock market, where companies' stocks are traded. Although the terms 'stock' and 'share' are nowadays used interchangeably, it is more appropriate to use the former when referring to the company as a whole (e.g. the stock of a manufacturing company), while the latter refers to the parts in which the company stock is divided.
Figure 4 below is a map showing the location and size of the top ten stock exchanges in the world. The size of a stock exchange is measured by the market capitalisation of its listed companies. It is easy to see how the USA, and especially the city of New York, currently dominates this type of market. In terms of market capitalisation, in 2018, the NYSE and the NASDAQ alone accounted for more than the other eight stock markets in the top-ten ranking together.
Figure 4 Top ten stock exchanges according to market capitalisation
Source: Open University, https://www.open.edu/openlearn/money-business/organisations-and-the-financial-system/content-section-3.1
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