Module 3 secondary market Secondary market: it is a market where already issued securities are traded. is a market where new securi Primary market : ‘Stock Exchange : stock exchange refers to an organised market in which listed shares and debentures ‘of companies can be purchased and sold. are issued to the public. ‘© Role and functions of stock exchange 1. Ready and continuous market for securities 2. Wider distribution of securities 3. Mobility and chanalisation of capital 4. Safety of capital and protection of investors 5. Evaluation of securities 6. Regulation of company management 7. Barometer of business progress 8. Help to bank 9. Facilities for speculation 10. Agency for capital formation 11. Supply of long time funds 12. Itact as a clearing house of business information National Stock Exchange It to provide National wide trading facility with access to investors all over the country. It has an automated screen based trading system using computers and modern technology to make the ‘operation more transparent. Bombay Stock Exchange The first stock exchange in India was started in 1875 in Bombay , under the name native share and stock brokers associations of Bombay .later this come to be known as Bombay stock exchange Listing of securities Listing of securities means pert the stock exchange jion to quote shares and debentures officially on the trading floor of Advantages of listing 1 liquidity image 3 wider market for shares 4 Easy Finance 5 Collateral securities6 Disclosure of vital information Disadvantages 1. Companies are subjected to strict rules and regulation 2. Companies may have to disclose with vital information to competitors such as the declaration of Bonus, dividend etc 3. The information received by stock exchange and related person may lead to speculation 4, The company may have to inquire heavy expenditure in public issue with listing procedures ‘Members of stock exchanges 1. Commission brokers 2. Jobers 3. Floor brokers 4, Tarawaniwalas 5. Arbitrageurs 6. Security dealers 7. Oddlot dealers ‘Speculator : speculator is a person who buy securities with a view to sell them in future at a profit Types of speculators 1.Bull: Bull is a person who buys shares expecting a rise in their prices. His intention of buying is to sell them at a profit at a future date. 2.Bear :A bear is a person who sells the shares with the expectation of buying them in future at a reduced price 3 .stag : He is the person who applied for shares in the new issue market with the intention of selling them at a profit when allotment is due 4.lame Duck: He is a speculator who find it difficult to meet his commitment ‘Speculative transactions 1. Option dealings : option dealing is an arrangement of right to buy or sell a certain, ‘number of specified securities at a predetermined price with in a prescribed time limit. 2, Margin trading : margin trading is a system of purchasing securities with fund borrowed from brokers 3. Arbitrage : It is Undertaken to make a profit out of the differences in prices of a security in two different markets. 4, Wash sales: under this method the speculator sell his securities and then Re purchases the same through the broker at a higher price 5. Blank Transfer : itis a method of transfer without mentioning the name of the transferee in the transfer deed2 3 Anywhere availabi 6. Cornering: A corner is the condition of the market in which almost the entire supply of a particular security is held by an individual or a group of i | pushing up the market price of a pa viduals 7. Rigging the market security Insider trading: Inside a trading is the trading of secu way connected with the company and has assess to non public price sensitive information about the company Screen based trading: Screen based trading is made through a network of computers connet exchange and brokers across the country Online trading ‘This method facilitates buying and selling of securities online through internet Benefits of online trading (Own trading Quick deci n and actions Low transaction cost ftrading i veer Selection of a broker Placing an order ‘Making the Contact Preparing contract note Settlement of transition Depositories Itis defined as an institution which a transfers the ownership of security in electronic ‘mode on behalf of its members Depository participant A DPis a agent of the depository who provides various services of the depository to investors Functions of depository Dematerialisation ‘Account transfer Transfer and registration Corporate actions Pledge and hypothecation6. Linkages with clearing system Rematerialisation: Re materialisation is the process by which an investor can get his shares and securities in electronic format converted into physical certificate Stock market indices ‘a number which measures the changes in a set of values over A period of Circuit breakers are a check on excessive fluctuation in stock market price or index Foreign institutional investor kK wvestor means an entityg established or incorporated outside India which proposes to make investment in India and which is registered as a Fll with security exchange Board of India Foreign portfolio investment Foreign portfolio investment is investment by foreign institutional investors in Indian securities including share Government, Bonds, convertible securities Private Equity Itrefers to investment are aimed at Gaining significant_control of unlisted companies