A financial market is any place, physical or electronic, where buyers and sellers exchange financial assets: currencies, shares, bonds, commodities and contracts based on them. The price you see on a chart is simply the last level at which a buyer and a seller agreed.

Why markets exist

Markets do three jobs for the economy:

• Raise capital. Companies sell shares and governments sell bonds to fund growth.
• Transfer risk. An airline can lock in tomorrow's fuel price today; a farmer can lock in the price of next year's harvest.
• Discover prices. Millions of decisions combine into one number that reflects what the crowd believes something is worth right now.

Traders contribute to the last job. By buying what they think is too cheap and selling what they think is too expensive, they move prices towards fair value and provide liquidity for everyone else.

Centralised exchanges

On a centralised exchange every order goes to one place, is matched in one order book, and settles through one clearing house. Everybody sees the same price at the same time.

The largest exchanges by value traded include the New York Stock Exchange and Nasdaq in the US, the London Stock Exchange, Euronext, Deutsche Börse in Frankfurt and the Japan Exchange Group in Tokyo. Futures on commodities and indices trade on exchanges such as CME and ICE.

Over-the-counter (OTC) markets

In an OTC market there is no single central place. Banks, brokers, funds and electronic platforms trade directly with each other, each quoting their own prices. Prices from different venues are close but never perfectly identical.

The foreign exchange market is the largest OTC market in the world. Bonds and most derivatives also trade over the counter.

What this means for you

Because forex trades OTC, the price on our platform comes from market data feeds rather than a single exchange. Small differences between providers are normal and are the reason two charts of EUR/USD from different companies never look exactly alike.