The Facts About the U.S. Capital Market System
Wall Street’s unique functions - matching those who have capital with those who will use it productively, and advising clients and investors on how to manage their investments - are vital to the world’s economic development. In raising and managing capital throughout the world, the industry helps fuel economic growth by creating jobs and committing capital to those industries of excellence that become future areas of economic strength.
Securities firms act as intermediaries between those who have money to invest and those who need capital. In performing that role, broker-dealers bring liquidity into the market. A high level of liquidity is one foundation of an effective, efficient market. It means that investors are able to convert assets into cash readily, and that they can buy or sell their shares quickly in large volume without substantially affecting the stock’s price. The greater the number of shares of a specific company that can be traded without influencing the price, the greater the market’s depth. Well-managed markets allow investors to buy and sell securities instantaneously, while enabling corporations and government agencies to raise long-term capital quickly at fair prices.
The investment advice and asset management services the securities industry offers are increasingly important because more Americans participate in the capital markets now than ever before. Individuals may use a broker-dealer’s services to reach their particular financial goals, such as education, housing, health, or retirement, and thereby increase their living standards.
IInstitutions such as pension funds may tap the industry’s expertise to develop and manage a portfolio that offers sufficient returns to meet pension costs. Companies may rely on firms to either help manage the risks involved when revenues are denominated in different currencies or create financial products that meet budgetary constraints.