What are capital markets?

In finance, capital markets has a narrow meaning: long-term funding through securities that investors can buy and sell. Shares and bonds are the usual examples. A company that needs money for ten years can borrow from a bank, or it can sell shares or bonds to investors. The second route runs through the capital market. In banking, capital markets is also the name of the division that arranges these deals: equity capital markets (ECM) for share issues and debt capital markets (DCM) for bonds.

The money market is the short-term counterpart of the capital market. EU prospectus law draws the line at one year. Article 2(a) of the Prospectus Regulation excludes money market instruments "having a maturity of less than 12 months" from its definition of securities. Financial markets is the wider term. It covers capital markets, money markets, foreign exchange and derivatives.

Equity and debt capital markets both work in two stages. On the primary market, an issuer sells new securities and receives the money. On the secondary market, investors trade those securities with each other, and the issuer receives nothing from these trades.

In equity capital markets, a company sells part of its ownership, for example in an initial public offering (IPO). In debt capital markets, a company or a state borrows for a fixed term and pays interest to the bondholders. In the EU, securities may be offered to the public only "after prior publication of a prospectus" (Article 3(1) of the Prospectus Regulation). Trading then takes place on a trading venue, which Article 4(1)(24) of MiFID II defines as a regulated market, a multilateral trading facility (MTF) or an organized trading facility (OTF).

A capital markets union is the EU project to join the national capital markets of the member states into one capital market for Europe. The European Commission calls it "a plan to create a single market for capital". The Commission adopted a first action plan in September 2015 and a new action plan with 16 measures on September 24, 2020.

On March 19, 2025 the Commission widened the plan into the savings and investments union (SIU). Its starting point is a figure: about 70% of household savings in the EU, worth EUR 10 trillion, are held as bank deposits. The strategy aims to give savers who wish to invest better access to capital markets. On December 4, 2025 the Commission proposed a market integration and supervision package with three legislative proposals.

Germany's largest exchange is the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse, FWB). It is an entity under public law, operated by Deutsche Börse AG, and its own Trading Surveillance Office, an independent body of the exchange, monitors trading on it. The Exchange Supervisory Authority of Hesse, part of the Hessian Ministry for Economic Affairs, supervises the proper conduct of trading there. BaFin investigates suspected insider trading and market manipulation at federal level. In Austria, Wiener Börse AG runs the stock exchanges in Vienna and Prague. Under § 3(2) of the Austrian Börsegesetz 2018, the operation of a regulated market needs a license from the FMA. MiFID II and the Prospectus Regulation apply in both countries.

Switzerland is outside the EU, so these EU acts do not apply there. Under Article 4 of the Financial Market Infrastructure Act (FinMIA), anyone who operates a stock exchange needs FINMA's authorization, and under Article 27 the exchange writes its own trading rules for FINMA's approval. Article 35 of the Financial Services Act (FinSA) requires a prospectus for a public offer of securities. This page gives no legal advice.

Digital capital markets are markets in which securities are issued and settled as tokens on a distributed ledger (DLT). Explained in the words of the ECB, tokenization means representing claims "digitally in the form of tokens that carry asset information and rules on a programmable platform". A bond can be issued directly on DLT, or an existing bond can be recorded there.

The market is still small. Tokenized assets on public blockchains reached an estimated EUR 38 billion in February 2026, up from EUR 7.4 billion at the start of 2024. Global assets stood at an estimated EUR 241 trillion at the end of 2025. The ECB found "limited evidence of secondary market trading taking place". The Eurosystem works to enable the settlement of DLT transactions in central bank money by the end of the third quarter of 2026 (ECB, April 13, 2026).