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A capital market is a market where business enterprises and governments can raise long term loans. A capital market includes both the stock market and the bond market. Here a government or a company can invoke money by either selling bonds or by selling stock, for the purpose of funding their operations and long term investment. In a capital market the money is provided for a term period that exceeds one year.
Generally, capital markets are supervised by the financial regulators, such as the UK's Financial Services Authority (FSA) or the U.S. Securities and Exchange Commission (SEC), to ensure that investors are protected against fraud, among other duties.
Further, capital markets may be classified as primary markets and secondary markets. In primary markets, new stock or bond issues are sold to investors by means of underwriting. While in the secondary markets, the existing securities are sold and bought among investors or traders on a securities exchange.