Most people think about the stock market when talking about financial markets. They don’t realize there are many kinds that accomplish different goals. Markets exchange a variety of products to help raise liquidity. Financial markets create an open and regulated system for companies to acquire large amounts of capital. This is done through the stock and bond markets. Markets also allow these businesses to offset risk. They do this with commodities, foreign exchange futures contracts, and other derivatives.
Since the markets are public, they provide an open and transparent way to set prices on everything traded. They reflect all available knowledge about everything traded. This reduces the cost of obtaining information because it’s already incorporated into the price.