Key Players in the Capital Markets

The key players in Capital Markets are broker-dealers, investment companies, investment advisers, securities exchanges, institutional investors, retail investors, and municipalities.

Author: Shriya Chapagain
Shriya Chapagain
Shriya Chapagain
Reviewed By: Celine Khattar
Celine Khattar
Celine Khattar
Coming from a background in Financial Engineering, Céline is a Financial Writer with 2+ years of experience in the Fintech industry. Currently based in the UAE, she covers diverse topics within the space, and is constantly following the latest market news and developments.
Last Updated:May 22, 2024

Who are the Key Players in the Capital Markets?

Broker-dealers, investment companies (such as mutual funds and private equity), investment advisers, securities exchanges, institutional investors, retail investors, and municipalities that issue securities are some of the participants in the U.S. capital market.

The term "capital markets" refers to financial markets that connect buyers and sellers to transact in stocks, bonds, currencies, and other financial assets. 

The trading of long-term financial products or securities (bonds, shares) occurs in a capital market.

Stocks, also known as equity or shares, refer to a company's ownership; bonds, also known as fixed income or debt securities, refer to a company's or a government entity's debt or creditorship; and other financial instruments traded on the U.S. capital market.

The market also includes shares of investment funds, pooled investment vehicles that consolidate the money investors contribute, and digital asset securities, which refer to digital representations of value in the form of securities.

The market, an essential component of the financial system, is one of the primary sources of funding for nonfinancial businesses in the United States.

Entrepreneurs can obtain the financial capital required to build prosperous businesses when there is a robust capital market. 

They can also expand already established businesses, which helps boost economic growth and the number of available jobs.

The capital market also helps cut the costs associated with conducting business by providing a consistent source of cash or liquidity to the global economy.

Key Takeaways

  • Capital markets are venues where savings and investments are channeled between suppliers—people or institutions with capital—and those who are in need of capital.
  • These markets are essential for economic growth, providing a platform for companies to raise funds and for investors to buy and sell securities.
  • Investment banks facilitate the issuance of new securities, assist companies in raising capital through initial public offerings (IPOs), mergers and acquisitions (M&A), and provide advisory services.
  • Brokerage firms act as intermediaries between buyers and sellers of securities, provide market research and analysis, and offer trading platforms.

Understanding Capital Market

The institutions facilitating the issuance and sale of long-term funds, such as debt and equity, are collectively referred to as the capital market. It is made up of two different markets, namely:

  1. Primary market 
  2. Secondary market

Primary market

The primary market, also known as the new issues market, is the market for trading securities that are issued for the first time.

The primary market's purpose is to make it easier for investors to transfer investable funds to businesspeople who want to launch a brand-new company or grow an existing one through the initial public offering (IPO) of securities.

These markets are focused on cutting-edge problems, and as a result, they are also known as the new issue market.

The process of an Initial Public Offering (IPO) is used by businesses to issue their shares in the primary market (IPO). The lPO is the procedure for issuing shares in the primary market for the first time to raise capital from potential investors.

In this market, direct trading occurs between investors and businesses. Therefore, the transaction does not involve a third party.

There are four major players in the primary market: 

  1. Corporations
  2. Institutions
  3. Investment banks
  4. Public accounting firms

Secondary market

There are several names for the secondary market, including the stock market and the share market. It is the market where already existing securities are bought and sold.

The secondary market is where the investors who participated in the primary market trade the securities they have acquired.

It makes it easier for current investors to sell their holdings and opens the door for new investors to enter the market. It also provides existing securities with liquidity and marketability.

There is never any new issuance of shares or bonds on the secondary market. Instead, it is where previously issued securities can be bought and sold to interested parties.

In the secondary market, transactions occur between investors with the help of a third party or stockbroker, who acts as an intermediary. 

A broker acts as a mediator between two investors during the negotiation process of purchasing securities and assists the parties in reaching an agreement.

Multiple sales of securities on the secondary market are possible. Therefore, the buyers, sellers, and investment banks are the most important participants in the secondary market.

Certain market structures, such as national securities exchanges, broker-dealers, and service firms, are essential enablers of secondary market trading and liquidity, both of which are significant to the overall health and efficiency of the markets.

Four Key Players in the Primary Market

Four primary securities players are in the market: corporations, institutions, investment banks, and public accounting firms. 

While corporations issue debtor equity to institutions as a return for the capital investment provided by institutions, corporations that are looking to grow and expand their businesses receive capital investments from financial institutions.

Investment banks are employed to match institutions and businesses according to their risk tolerance and investment preferences.

Public accounting firms are also in charge of tax work, accounting system consulting, mergers and acquisitions, capital raising, and preparing, reviewing, and auditing financial statements.

Let's take a closer look at the various participants in the primary market:

1. Corporations

In the capital market, corporations conduct themselves similarly to operating businesses, which require capital to expand and continue their operations.

A corporation is a legal entity distinct from its owners and exists independently from them. Typically, it refers to a collection of people or entities that have been given the authority to act as a single entity.

Corporations have the majority of the rights and responsibilities normally reserved for individuals, such as entering into contracts, lending and borrowing money, employing workers, owning assets, and paying taxes.

In this particular market, corporations can act independently and require investments and funds to manage and expand the business. 

The makeup of the corporations varies according to factors such as size, sector, and location in the world.

Corporate development, investor relations, and financial planning and analysis (FP&A) are all careers related to the markets that can be pursued within corporations.

Examples of publicly traded corporations include Alphabet, Amazon, Apple, Exxon, and Toyota.

2. Institutions

The capital market's institutions are made up of fund managers, institutional investors, and retail investors. 

These investment managers make sufficient capital available to businesses that need financial support to expand and run their operations.

In exchange for the financial resources provided by financial institutions, corporations issue debt in the form of bonds or equity in the form of shares. The exchange of capital and debt or equity completes the cycles of the two major market participants.

Long-term bonds from the financial system and loans from international financial institutions are other ways that institutions raise money.

These institutions aim to make the investment process easier and establish a relationship between fund users and investors.

Some examples of leading companies are Blackstone, Kohlberg Kravis Roberts & Co, The Carlyle Group, Bridgewater Associates, and Apollo Global Management.

3. Investment Banks

Investment banks are contracted to fulfill the role of intermediaries to facilitate business transactions between corporations and institutions.

Investment banks are responsible for connecting institutional investors with corporations, assisting clients with mergers and acquisitions (M&As), and advising clients on one-of-a-kind investment opportunities based on their clients' risk tolerance, desired rate of return, and investment style preferences.

The purpose of investment banks is to act as guides for their clients, assisting them in making sound judgments and concluding profitable business transactions so that their clients suffer the least amount of financial loss possible.

Investment banks provide advisory services to large corporations and corporate bodies and offer such services to their customers, advising them to buy back their shares from the market at the appropriate time.

An investment bank's primary role is to act as a go-between for large corporations and smaller institutions.

Careers in investment banking involve extensive financial modeling and valuation analysis. Examples of top investment banks are Goldman Sachs, JP Morgan, Credit Suisse, HSBC, and Morgan Stanley.

4. Public Accounting Firms

The term "public accounting" refers to an organization that offers its bookkeeping services to other businesses. Expertise in accounting, auditing, and tax preparation are some of the services that public accountants offer to their clients. 

A public accounting firm can be defined as a sole proprietorship, partnership, or legal entity engaged in providing services as public accountants.

This can include delegating the management of a significant number of accounting functions to a third party.

Depending on the departments that make up their business, public accounting firms can play various roles in the primary market.

The roles include providing financial reporting and auditing financial statements, as well as providing taxation advice, consulting on accounting systems, mergers and acquisitions advisory services, and capital raising.

Therefore, corporations usually hire public accounting firms for their accounting and advisory services. Examples of the best public accounting firms include Deloitte, PwC, Ernst & Young, and KPMG.

Key Players in the Secondary Market

In the primary market, companies initially issue debt or equity instruments to raise capital for their businesses and fund new projects.

On the other hand, the secondary market allows investors to buy, sell, and exchange already existing securities like equity, debt, and bonds with other investors. 

Brokers are the middlemen who help both parties reach a consensus on the terms of the trade.

In contrast to the primary market, which involves the initial issuance of debt or equity in exchange for capital, the secondary market enables the purchase and sale of bonds and shares that have already been issued. 

The secondary market facilitates easy entry and exit for market participants, contributing to the market's liquid nature.

The following are some of the significant participants in the secondary market:

1. Buyers and Sellers

The secondary market exchange is where buyers and sellers trade. In the secondary market, fund managers and other investors who want to buy securities or debts must find a seller: this is a market requirement.

A marketplace, such as a stock exchange or an over-the-counter market, facilitates transactions for buying and selling stocks. 

The stock exchanges offer clearinghouse services for netting payments and delivering securities. The New York Stock Exchange is an example of a centralized stock exchange platform.

The over-the-counter (OTC) market does not have a centralized trading platform. Instead, it is a sizable network of computers and phones. As a result, it is highly competitive, with everyone vying for the lowest price. 

In contrast to trading through an exchange, the OTC market is more risky because parties deal with one another.

2. Investment Banks

Investment banks are experts in debt and equity research. They collaborate closely with traders and other members of the security sales staff to ascertain the approximate prices of various types of securities based on the current market state.

In the primary market, investment banks are responsible for facilitating the issuance of bonds and shares.

In the secondary market, however, they are accountable for facilitating the sales and trading of issued debts and equities between buyers and sellers because they act as a middleman.

Investment banks provide equity research coverage to assist buyers and sellers in decision-making. This coverage discusses the upside potential, downside risk, and rationale of each stock in the market.

In addition, investment banks will act as buyers, sellers, and securities traders on behalf of their clients to boost the latter's profits.


The capital market, also known as the securities market, is a trading market that collects funds from investors and makes those funds available to businesses and the government for various projects.

The stock market and the bond market are both components of the capital market. 

Three types of banks make up the capital market: 

  • Commercial banks
  • Development banks
  • Stock exchanges

The above article explains the capital market and its main participants. The stock and derivatives markets are two subsets of the capital market, which are referred to as the primary and secondary markets, respectively.

Financial institutions invest their excess capital in corporations to generate a return in the primary market. 

Corporations then issue debt or equity instruments to raise capital from investors to expand, run their businesses, and fund new ventures.

Investment banks provide advisory services to institutional and corporate clients regarding mergers and acquisitions (M&A) and initial public offerings (IPO). 

Services in the areas of accounting and advisory consulting are provided to corporations and institutions by public accounting firms.

The term "secondary market" refers to a market in which investors can meet other investors to engage in trading in the bonds and equities that corporations have issued.

The secondary market is a platform for trading existing securities, and investors can efficiently enter or exit the market for securities.

Investment banks assist buyers and sellers in making decisions about their securities by providing services in sales, trading, and research.

Researched and authored by Shriya Chapagain | LinkedIn

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