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.
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.