We refer to the 'markets' or 'the capital markets' or the 'City' or indeed many other such generic expressions in business, in the media or in general conversation, but what exactly do we mean?

'The markets' can mean stocks or shares, or money or commodities or, for that matter, commerce. A livestock farmer probably relates the term 'market' to something quite different from a banker, likewise estate agents and fund managers, yet the 'financial' markets affect them all in some way or other. On that basis markets are perhaps best described as component parts of the business and commerce functions that exist within the economic environment of a country.

In the financial services industry such markets exist in a variety of guises. We have stock markets, money markets, derivative markets, commodity markets and also wholesale and retail markets. In many instances there is a direct relationship between them so that investment products sold in the retail markets are structured around products traded in, for instance, the stock markets. This interaction is crucial as, for instance, the fundamental function of a stock market is to enable companies to raise finance and this relies on investors providing the finance through direct (purchase of shares) or indirect (purchase of investment products, e.g. ISAs) buying of the stock offered. We can also look at house buyers in the 'property market' who, in most cases, need to raise funding through mortgages or loans from banks. The property market reacts to the availability of the buyers,...