Secondary Market
The presence of the secondary market is instrumental in providing liquidity to the transactions in the primary market. After the companies sell the shares in the primary market directly to the investors, then the shares are further traded in the secondary market through stock exchanges. It is obvious that the share capital of the company remains unaffected due to the transactions in the secondary market. Only the details like the name and address of the buyer will replace that of the seller’s in the records of the company. The transactions in this market may be for investment purpose or for speculation. The prices at which shares are traded in the market are available real time through various websites or through various television channels.
Functions of secondary market
Following are the functions of this market :
- It helps to discover the market price of various stocks
- It increases the liquidity of the securities market.
- Most importantly, it helps in capital formation.
- Mobilizing savings to investments
Instruments in secondary market
Financial instruments available in the secondary market for investors :
- Fixed income Instruments (debentures, pension plans, etc)
- Variable income Instruments (equity, derivatives)
- Hybrid income Instruments (mutual funds, convertible preferential share)
Players in secondary market
- Stock brokers
- Investors
- Market intermediaries
- Stock exchange
Recommended Read :
- What is Rights issue of a Share?
- Convertible Preferred Shares
- What is Capital Market?
- Indian Stock Market Trading Hours
- Guide for Stock Trading in India
- Indian Online Stock Market Trading
- Market Timing of Indian Stock Markets
- Indian Stock Market Holidays
- What is Volatality?
- What is a Volatile Market?
- What is Pre Open Trade Session?
- What is STT All About Securities Transaction Tax?
- IIP Data and Stock Markets
- Online Trading Brokers in India
This is a very informative post. It really gives an insight to what I was searching for. Before reading this article, I didn’t know that secondary market was so vast. The concept has a lot to understand and many topics have to be dug in detail. Anyway, this post gives a bird’s eye view to the concept and has fulfilled its intention. Well did author!