A financial market is a system where financial instruments are bought and sold. It can run through a physical exchange, an electronic platform, a broker network, or an over-the-counter market.
A financial market moves capital from savers and investors to the businesses, governments, and individuals that need it. In doing so it supports liquidity, price discovery, and the transfer of risk between participants.
Financial markets come in several types: stock markets, bond markets, foreign exchange markets, commodity markets, money markets, and derivatives markets, each with its own instruments and risks. A financial market differs from a financial institution, which is the organisation that participates in or intermediates those trades rather than the venue itself.
A company wants to raise capital to expand.
It issues new shares on the stock market, and investors buy them.
The stock market acts as a financial market because it connects the company that needs capital with the investors who want ownership.