secondary market


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secondary market


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By Nandhini Narayana Swamy Pallavi Secondary Market


SECONDARY MARKET According to Pyle, “Security exchanges are market places where securities that have been listed thereon may be bought & sold for either investment or speculation”


Features : Secondary market deals in previously issued securities. This market is not the place of the origin of the security. Securities are not issued directly by the company to investors. Securities are sold by the existing investors to another investors.

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The intending buyer & seller can buy & sell securities through brokers. It transfer existing securities between buyers & sellers. Secondary market do not directly contribute to capital formation.

Purpose Of Secondary Market::

Purpose Of Secondary Market: It helps in the capital formation of the country. It maintains active trading. It increases liquidity of assets. It also helps in price recovery process.

Instruments :

Instruments Equity shares Preference shares Debentures & bonds Government securities


Functions: Ensure liquidity of capital: The stock exchanges provide place where shares and stock are converted into cash . Continuous market for securities: The stock exchanges provide a ready market securities Evaluation of securities : The investor can evaluate the worth of their holdings from the prices quoted at different for those securities Mobilizing surplus savings: The exchanges provide a ready market for various securities. The investor do not have any difficulty in investing their savings by purchasing shares, bonds etc

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Helpful in raising new capital: The new and existing concerns need capital for their activities. The new concerns raise capital for the first time and existing un its increase their capital for expansion and diversification purposes Safety in dealings: The dealings at stock exchanges are governed by well defined rules and regulations of securities contract act 1956 Listing of securities: Only listed securities can be purchased at stock exchanges

Major Players Of Secondary Market ::

Major Players Of Secondary Market : Stock broker: A stock broker is a qualified and regulated professional who buys and sells shares and other securities through market makers on behalf of investors.

Kinds of Stock Broker::

Kinds of Stock Broker : Commission broker Jobber Floor Broker Taraniwalla Budliwalla Arbitrageur Security Dealer

2)Financial Intermediaries::

2) Financial Intermediaries: Financial intermediaries in the secondary market facilitate financial transactions of both individual and corporate customers in financial markets Various financial intermediaries are : Commercial banks Developmental financial institutions Insurance company Mutual fund Non banking financial institutions

Role of Financial Intermediaries: :

Role of Financial Intermediaries: Bringing suppliers and demanders of funds together Transformation of funds

3) Individual Investors::

3 ) Individual Investors: Individual investors make implicit forecast or assumptions without elaborate reports because they have no need to communicate beyond the purchase or sale order to their brokers.

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