Perfect Capital Market:

Capital market is a branch of financial market. Capital markets can be defined as markets where money is
exchanged between people who have the excess of it to those who are in need. The instruments of capital
markets including shares , bonds and debentures are long term usually more than 1 year. The regulatory
body of Capital market in Pakistan is Securities and exchange commission of Pakistan.
Perfect capital market can be describe as a market structure in which there are no taxes, transaction
related cost or information processing charges.
Features of Perfect Capital Market:
Following are the features of perfect capital markets which includes:

1) No barriers to entry in the market: Anyone personal can enter/ participate in the market which means
borrowers and lenders can enter the market and deal with each other.
2) Large number of buyers and sellers, perfect competition prevails in the market due to large number of
buyers and sellers of securities.
3) No transaction cost and taxes: absence of taxes and transaction cost means that participants can sale
and purchase securities easily without incurring extra costs.
Types of Perfect Capital Market:
There is two types of capital market:

 Primary Market
 Secondary Market
Primary market:
The primary market is that part of the capital markets that deals with the issuance of new securities.
Companies, governments or public sector institutions can obtain funding through the sale of a new stock
or bond issue. This is typically done through a syndicate of securities dealers. The process of selling new
issues to investors is called underwriting. In the case of a new stock issue, this sale is an initial public
offering (IPO). Dealers earn a commission that is built into the price of the security offering, though it can
be found in the prospectus.
Secondary market:
The secondary market, also known as the aftermarket, is the financial market where previously issued
securities and financial instruments such as stock, bonds, options, and futures are bought and sold.[1].
The term “secondary market” is also used to refer to the market for any used goods or assets, or an
alternative use for an existing product or asset where the customer base is the second market, for example,
corn has been traditionally used primarily for food production and feedstock, but a second- or third-
market has developed for use in ethanol production. Another commonly referred to the usage of the
secondary market term is to refer to loans that are sold by a mortgage bank to investors.