A Comparative Study On

Organised Security Market

(otc) And Unorganised
Security Market
Presentation By Deepak Murmu
B.B.A 3rd year
ST Xavier College

What is security market ?

Securities market is a component of the wider

financial market where securities can be bought
and sold between subjects of the economy, on
the basis of demand and supply. Securities
markets include equity markets, bond markets
and derivatives markets where
prices can be determined and participants both
professional and non professionals can meet.

Types of Security Market

Primary
Secondary
Organised
Over
Security
The
Security
Counter
Exchange
Market
Market

Explanation

Securities markets can be split into two levels. Primary

markets, where new securities are issued and secondary
markets where existing securities can be bought and sold.
Secondary markets can further be split into
organised exchanges, such stock exchanges and
over-the-counter where individual parties come together
and buy or sell securities directly.
For securities holders knowing that a secondary market
exists in which their securities may be sold and converted
into cash increases the willingness of people to hold stocks
and bonds and thus increases the ability of firms to issue
securities.

Explanation

Organised Exchange-An exchange, or bourse is a highly

organized market where (especially) tradable securities,
commodities, foreign exchange, futures, and options contracts
are sold and bought.
Stock Exchange-A stock exchange or bourse is an exchange
where stock brokers and traders can buy and/or sell stocks (also
called shares), bonds, and other securities. Stock exchanges may
also provide facilities for issue and redemption of securities and
other financial instruments, and capital events including the
payment of income and dividends.
Over The Counter (OTC)-Over-the-counter (OTC) or offexchange trading is done directly between two parties, without
the supervision of an exchange. It is contrasted with
exchange trading, which occurs via exchanges. A stock exchange
has the benefit of facilitating liquidity, mitigates all credit risk
concerning the default of one party in the transaction, provides
transparency, and maintains the current market price. In an OTC
trade, the price is not necessarily published for the public.

Features of Stock Exchange

Organised Market:
Stock exchange is an organised market. Every stock
exchange has a management committee, which has all the
rights related to management and control of exchange. All
the transactions taking place in the stock exchange are
done as per the prescribed procedure under the guidance of
the management committee.
Dealings in Securities Issued by Various Concerns:
Only those securities are traded in the stock exchange
which is listed there. After fulfilling certain terms and
conditions, security gets listed on the stock exchange.
Necessary to Obey the Rules and Bye-laws:
While transacting in Stock Exchange, it is necessary to obey
the rules and bye-laws determined by the Stock Exchange.

Features of Stock Exchange

Dealing only through Authorised Members:

Investors can sell and purchase securities in stock
exchange only through the authorised members. Stock
exchange is a specified market place where only the
authorised members can go. Investor has to take their help
to sell and purchase.

Over-The-Counter Market
Meaning-

It is a decentralized market, without a central

physical location, where market participants trade with one
another through various communication modes such as the
telephone, email and proprietary electronic trading
systems.An over-the-counter (OTC) market and an
exchange market are the two basic ways of organizing
financial markets. In an OTC market, dealers act as market
makers by quoting prices at which they will buy and sell a
security or currency. A trade can be executed between two
participants in an OTC market without others being aware
of the price at which the transaction was effected. In
general, OTC markets are therefore less transparent than
exchanges and are also subject to fewer regulations.

Features of OTC

It does not have any physical location.

In over-the-counter market unlisted securities are traded.
Price is negotiable between dealers through computer
networks e-mail, telephone.
OTC have both the customer market where dealers trade
with corporation institution and inter dealer market where
dealer trade with each other.
Cost of transaction is low.
Decentralized due to the presence ofmultiple
intermediaries or stock brokers.

DIFFERENCE BETWEEN STOCK

EXCHANGE AND OTC MARKET
STOCK EXCHANGE

OTC MARKET

Has detailed rules and regulations Has no detailed rules and

in order to be enlisted.
regulation.
Has a physical location.

Has no physical location.

Highly regulated therefore

comparatively less risky.

Less regulated therefore

comparatively more risky.

Cost of transaction is high.

Cost of transaction is low

Centralized due to fewer

intermediaries or stock brokers.

Decentralized due to the

presence ofmultiple
intermediaries or stock brokers

Comparatively less high-tech and

communication b/w concerned
parties can also take place face to
face.

more high-tech and

communication between concern
parties take place via electronics
device.

 Organised Securities Markets

An organized securities exchange is defined as "A securities

marketplace where purchasers and sellers regularly gather
to trade securities according to the formal rules adopted by
the exchange.
Stock exchange or organized stock exchange (also called
stock market or share market) is one important constituent
of capital market. It is an organized market for the purchase
and sale of industrial and financial security. It is convenient
place where trading in securities is conducted in systematic
manner i.e. as per certain rules and regulations. It performs
various functions and offers useful services to investors and
borrowing companies. It is an investment intermediary and
facilitates economic and industrial development of a
country.

Organised Securities Markets

Stock exchange is an organized market for buying and

selling corporate and other securities. Here securities are
purchased and sold out as per certain well defined rules
and regulations. It provides a convenient and secured
mechanism/platform for transactions in different securities.
Such securities include shares and debentures issued by
public companies which are duly listed at the stock
exchange and bonds and debentures issued by
government, public corporations and municipal and port
trust bodies.