Puzzled by How Markets are Classified?

Global financial markets are categorized by:

1. Primary vs. Secondary Markets - Classification by fund flow.

* Primary: Companies sell new securities directly to investors to raise capital (e.g., via an IPO like $SpaceX(SPCX.US)). Funds flow from the buyer directly to the issuer.

* Secondary: Facilitates subsequent trading between investors. Funds flow exclusively between traders, providing essential liquidity.

2. Spot vs. Futures Markets - classified by the timing of delivery.

* Spot: Designed for immediate delivery. This suits participants needing immediate physical possession of an asset, like a processor buying industrial metals for production.

* Futures: Involve contracts for delivery on a specific future date. These are used by investors wanting to profit from price fluctuations w/o handling or storing physical goods.

3. Money vs. Capital Markets - Maturity, liquidity, and risk profiles determine which an asset belongs to.

* Money: Trade instruments maturing in less than one year, such as short-term treasury bonds, certificates of deposit, commercial paper & repurchase agreements. Trades feature high liquidity & low risk, serving short-term capital needs or temporary placement for idle funds.

* Capital: Involve medium-to-long-term assets (maturities over one year) like bonds & equities. They feature lower liquidity & higher risk, but offer favorable returns & finance long-term corporate development plans.

4. Traditional vs. Alternative Markets - divided by the conventionality of the asset class.

* Traditional: Cover standard, publicly traded assets including stocks, bonds, currencies, & futures.

* Alternative: Consists assets outside traditional categories, such as private equity (including venture capital), hedge funds, real estate, commodities, infrastructure & collectibles. They are typically less liquid, less market-correlated & frequently trade at a discount or premium.