Primary and Secondary

Market

Primary market:
The primary market provides the channel for sale of new securities.
The primary market is also known as new issues market
Primary market provides opportunity to issuers of securities; Government
as well as corporates, to raise resources to meet their requirements of
investment and/or discharge some obligation.
The transaction is conducted between the issuer and the buyer.
In short, the primary market creates new securities and offers them to the
public.
For instance, Initial Public Offering (IPO) is an offering of the primary market
where a private company decides to sell stocks to the public for the first time.
An important point to remember here is that in the primary market, securities
are directly purchased from the issuer.

Classification of Issues:

Issue of Shares:
Different kinds of issues:
Initial Public Offering (IPO).
A follow on public offering (Further Issue).
Rights Issue.
A Preferential issue.
SECONDARY MARKET:
Secondary market refers to a market where securities are traded after
being initially offered to the public in the primary market and/or listed on
the Stock Exchange.
The top two stock exchanges of India are Bombay Stock Exchange and
National Stock Exchange.
An investor can trade in securities through the stock exchange with the
help of brokers who provide assistance to their client for purchasing
and selling.

The brokers are the registered members of the recognized stock

exchange in which the investor is trading his / her securities.

The brokers are allowed to trade on the advanced trading system.

The SEBI issues a certificate of registration to the member brokers

through which an investor can identify whether a broker is registered or
not.
Functions of Secondary Markets:
Provides regular information about the value of security.
Helps to observe prices of bonds and their interest rates.
Offers to investors liquidity for their assets.

Secondary markets bring together many interested

parties.

It keeps the cost of transactions low.

Process of trading:
Step 1: to trade Investor / trader decides.
Step 2: Places order with a broker to buy / sell the
required quantity of respective securities.
Step 3: Best priced order matches based on price-time
priority.

Step 4: Order execution is electronically communicated

to the brokers terminal.

Step 5: Trade confirmation slip issued to the investor /

trader by the broker.

Step 6: Within 24 hours of trade execution, contract

note is issued to the investor / trader by the broker.

Step 7: Pay-in of funds and securities before T+2 day.

Step 8: Pay-out of funds and securities on T+2 day.