Learn something new every day More Info... by email
A restricted market is a type of market in which there is a great deal of governmental control on the rate of exchange within that marketplace. Typically, governmental regulations will have more influence on how that market functions than is true with other markets that tend to shift based on a wider range of economic events and circumstances. A restricted market is often considered a situation that occurs with currency exchanges, but can also be found in other types of market situations.
One of the easiest ways to understand the concept of a restricted market is to consider the rate of exchange that surrounds a currency issued by a specific nation. When the market is restricted, the value of that currency is directly tied to the currency issued by another nation, usually with the use of governmental regulations. The end result is that the exchange rate for that currency will shift in accordance to what is happening with the second currency, rather than other economic factors such as the financial stability of the issuing country.
The general goal of a restrictive market is to make use of governmental laws and regulations to ensure that the marketplace is kept relatively secure. When managed to best effect, the market is less susceptible to potential scams or investment deals that may be somewhat questionable. In some situations, the degree of restrictions present in the marketplace may be somewhat prohibitive, leading to investors choosing to focus attention on assets that are not traded in that particular marketplace.
A restricted market is not considered the most controlled of all market situations. A blocked market, in which certain transactions are not allowed to take place at all, is generally thought to be the most closely held and managed type of market situation. By contrast, a free market enjoys few, if any, real governmental regulations and restrictions, with a number of economic factors directly influencing the movement of the value of assets traded within that marketplace.
Detractors of a restricted market often consider this type of situation to prevent free enterprise, effectively limiting opportunities for investors in the marketplace. Supporters of a restricted market note that having governmental regulations in place can often prevent manipulation of that market, and actually prevent some investors from losing money. There is no universal agreement about how much regulation is too much, making it sometimes hard to decide if a particular market is truly restrictive.
One of our editors will review your suggestion and make changes if warranted. Note that depending on the number of suggestions we receive, this can take anywhere from a few hours to a few days. Thank you for helping to improve wiseGEEK!