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What Is a Global Capital Market?

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  • Written By: Kenneth W. Michael Wills
  • Edited By: Kaci Lane Hindman
  • Last Modified Date: 05 September 2016
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A global capital market is the interlinking of various investment exchanges around the world that enable individuals and entities to buy and sell financial securities on an international level. The interlinking of these various exchanges results in the emergence of an informal, but never-the-less structured global capital market. Spurred by the decoupling of exchange controls and foregoing of adjustable peg exchange rates from individual capital markets, in addition to technological advances that have facilitated the movement of capital around the world, investors have increasingly sought investments in multiple currencies. While equities still lag behind, other investments, such as bonds, currencies and foreign exchanges, are all interlinked and highly visible in international trading. Yet to reach full maturity, the market is growing and integrating at a steady pace as investors continually shift investments to the most stable, well-regulated or high-growth economies around the globe.

As the complexity and interlinking of the global economy grows, so follows the capital markets. Currently, financial institutions around the world transfer billions of dollars worth of assets and investments on a daily basis in cross border exchanges. Assessing the worth of the global capital market, many researchers and economists have concluded the total represents more than $200,000,000,000,000 US Dollars (USD) and will continue to grow well into the future.

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Potential benefits of the global capital market can have a profound impact both on economies at large and individual businesses. Corporations and governments that solicit the public for capital can solicit investors all over the globe, not just in a defined geographical market. IInvestors can respond by investing assets that best meet their investment objectives, whether in developing economies with the aim of achieving high growth or in stable economies that are mature to better shield investments. Regulatory consequences, however, are inherent to the process and are usually pulled along by demands of investors.

Information has always been crucial in investment decisions, but in the global capital market access to this information in a transparent and rapid manner is essential for investors to make qualified decisions. With the technology available to deliver that transparency rapidly, regulatory requirements are left with little options other than to keep up with investor demands. Thus, many researchers have predicted that by the time the market matures, economies will tend to be more stable, reliable and predictable due to the unique investors requirements that demand solid and enforceable regulation that allows investment growth while mitigating associated risks.

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burcinc
Post 3

@discographer-- I don't think that's a disadvantage either. The true disadvantage (and sometimes advantage) is that, since everyone is so interconnected thanks to the global capital market, if things start going bad for several major players, everyone else will be negatively affected too. But if things go exceptionally well, then it has a positive effect on everyone else.

SarahGen
Post 2

@discographer-- But how would anyone supervise such a huge and complex market? And who could do that? It's not possible or ideal to supervise the global capital market.

Also, like the article said, although this is an informal market, it has its own mechanisms. It runs on the rules of money markets and in a way, it's self-regulated. So it doesn't need to be supervised.

I don't agree that there is unfair competition. I actually think that developing countries have a lot to benefit from by participating in the global capital market. Sometimes, it's an issue of resources available for trade and that's not something we can control.

discographer
Post 1

I'm not an expert on this topic but I think it's bad that the global capital market is basically unsupervised. Not everyone has the capacity to engage in this global market, and those who can have an unfair advantage. For example, developing countries and poor countries are not as active in this market. So they don't benefit as much which causes them to lag behind economically and technologically. There is unfair competition as a result.

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