London Stock Exchange

What Are Capital Markets?

from Capital Markets

Capital markets are the venues and mechanisms through which companies and governments raise long-term funding by issuing securities — shares or debt instruments — to investors. The primary market is where new securities are created and sold for the first time (an IPO or a bond issuance), while the secondary market is where existing securities are traded between investors (the London Stock Exchange, for instance). The distinction matters because lawyers advising on a primary market transaction focus on disclosure, structuring, and regulatory compliance, whereas secondary market work centres on trading rules, market abuse, and ongoing obligations.

Debt Capital Markets

from Capital Markets

Instead of selling ownership, companies can raise funds by issuing bonds — debt instruments that promise to pay investors a fixed or floating coupon (interest rate) and return the principal at maturity. Investment-grade bonds are issued by highly rated borrowers and carry lower yields, while high-yield bonds (often called junk bonds) offer higher returns to compensate for greater credit risk. Bonds may be listed on exchanges like the London Stock Exchange or traded over-the-counter. The documentation — typically an offering circular or prospectus — is heavily negotiated, with covenants restricting what the issuer can do (e.g., limits on further borrowing or asset disposals) to protect bondholders.