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Primary Market

A market that issues new securities on an exchange. Companies, government and other groups obtain financing through debt or equity based securities. Primary Markets are facilitated by underwriting groups which consists of investment bank that will set a beginning price range for a given security and then oversee its sale directly to investors

Secondary Market A market in which an investor purchase a security from another investor rather than the issuer subsequent to the original issuance in the primary market, also called aftermarket.

Methods of issuing securities in the primary market

Public issue- An offer to public by an issuer through a prospectus for subscription . Public issue involves sale of securities to the public at large. Private placement- an offer to the specific known persons selected by the sponsors for procuring subscription. Right Issue An offer in which existing shareholders are offered new securities in proportion to their existing holdings. Offer for sale - An invitation to the general public to purchase the stock of a company through an intermediary.

Products dealt in the secondary market


o o o o o


Equity sharesRight issue Bonus shares Preferred stock Cumulative preference shares Convertible preference shares Govt. securities Debentures Bonds Commercial Papers

Structure of Stock Exchange

16 stock exchanges (set up as companies,

3 stock exchanges

(set up in association of

either ltd. By guarantee, or by shares)

persons and later converted into companies) BSE (Bombay) ASE (Ahmedabad) MPSE (Madhya Pradesh)


Established in the year 1992, GOI authorized IDBI for establishing this exchange for cities and towns across the country. NSE was set up by leading institutions to provide a modern fully automated screen based trading system with national reach. NSE has brought about unparallel transparency speed and efficiency safety and market integrity


BSE is the oldest stock exchange in Asia and has the greatest no. of listed companies in the world. 4700 companies are listed as of August 2007. It is located at Dalal Street Mumbai, India History It traces its history to the 1850s. In 1956 the BSE became the first stock exchange to be recognised by Indian Govt. under Securities Contracts Regulation Act. In 1986 SCRA gave BSE a means to measure overall performances of the exchange.

Services of BSE

Investor ServicesBSE was the first exchange in the country to provide an amount of Rs. 1 million towards the investor protection fund. BSE online trading (BOLT) SurveillanceBSEs online surveillance system monitors on a real time basis the price movements, volume position and members position. In Feb 2001 BSE introduced the worlds first centralised exchange based internet trading system


Foremost authority presiding over the capital markets is SEBI.SEBI is the regulatory authority established under section 3 of SEBI Act 1992 to protect the interest of the investors in securities and to promote the development of and to regulate (promote, maintain fair efficient secure and transparent market) the securities market and for matters connected therewith and incidental thereto.


market Evaluation of securities Protection of investor Mobilization of saving Capital formation Economic barometer Regulation of company management Clearing house of information

Role and Functions of Stock Exchange

Established for the purpose of assisting, regulating and controlling business of buying, selling, and dealing in securities. Provides a market for the trading of securities to individuals and organisations seeking to invest their saving or excess funds through the purchase of securities. Provides a physical location for buying and selling securities that have been listed for trading on that exchanges.

Role and Functions of Stock Exchange

Establishes rules for fair trading practices and regulates the trading activities of its members according to those rules. The exchange itself does not buy or sell the securities nor does it set prices for them. The exchange assures that no investor will have an undue advantage over other market participants. This means that orders executed and transaction are settled in the fastest possible way. Investor make informed and intelligent decision about the particular stock based on information

Listed companies must disclose information in timely complete and accurate manner to the exchange and public on a regular basis.

Role and Functions of Stock Exchange

Required information include stock price, corporate conditions and developments dividends, mergers and joint ventures and management changes. People who buy or sell stock on an exchange do so through a broker. The broker takes your order to the floor of the exchange looks for a broker representing someone wanting to buy/sell. If mutually agreeable price is found the trade is made.