Financial markets do not necessarily have to be located in fixed physical venues; remote transactions conducted through electronic communication and the Internet also constitute a significant part of modern financial markets. Trading can take place on organized exchanges or in over-the-counter (OTC) markets. Exchanges are organizations with centralized order-matching mechanisms. Famous examples include the New York Stock Exchange, the London Stock Exchange, or the Tokyo Stock Exchange, which offer standardized products, transparent pricing, and a regulatory framework. Electronic platforms such as NASDAQ represent the trend of informatization in modern markets. In contrast, foreign exchange and most bond transactions primarily occur in the form of bilateral negotiated OTC markets, relying on financial institutions, brokers, and electronic trading systems to maintain their operation [4].
Participants in financial markets include individual investors, corporations, banks, securities brokers, securities companies, insurance companies, institutional investors, and government agencies. They enter the market based on their respective capital needs, investment objectives, or risk management purposes. The prices formed in the market reflect the uncertainty of future cash flows and the evaluation of risks. The prices of debt instruments such as bonds are closely related to interest rate levels. Through buying and selling activities, markets provide liquidity, generate benchmark interest rates and asset prices, and help form macroeconomic information, thus exhibiting a high degree of interactivity with the overall economic operation.
Financial markets can exist within different institutional environments. Under a market economic system, prices are usually determined by supply and demand, and capital flows freely based on the comparison of returns and risks [5]. In contrast, financial markets may also exist under a planned economic system, but their functions and operation methods are more constrained by administrative directives, policy goals, and institutional arrangements. Such markets typically exhibit different characteristics in terms of capital allocation, risk pricing, and asset liquidity [6].
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