What is a “Secondary Market”? A Full Explanation

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“Secondary Market” is a market, which offers investors a platform for trading in initially issued securities.

This means the initial securities issued on a primary market by the corporations, central and state governments and public bodies via the IPO are securities such as equities, liabilities, debentures, futures, options, etc (Initial Public Offer). The stock is then listed and traded among investors on the secondary market. It is called aftermarket for that very reason.

The selling profit goes to the investors rather than to the issuer company, as the sale is carried out among the investors. It is a market where securities are regularly traded without any difficulties or delays with a considerable level of security, liquidity and transparency.

Stock Broking:

Stock Broker is an exchange member who acts as a link for the retail and institutional investors to facilitate transactions and is called Stock Broking for the services provided. The stockbroking companies charge a certain amount as a commission or service fee, known as Brokerage.

Stockbrokers are members of brokerages that exchange stocks and OTCs wherever securities are best prized and liquidated. Wherever they are.

In order to start operations, the bonds must be registered with the exchange board and are also appointed as registered shareholder representatives.

In addition, to carry out the transaction, they must adhere to the recommended code of conduct. The brokers enter the transaction either for themselves or for their customers, i.e. investors.

Functions of Secondary Market:

Primary market growth: The secondary market assists with the growth of the primary market by providing investors with a ready market for their securities, such as mutual funds, financial institutions and other investors.

Economic indicator: Whenever changes occur in the government, its policies or in any international event, the secondary market is ultimately affected. This is because the secondary market is highly sensitive to changing economic conditions in general.

This is also a sign of a stable country’s economic situation when the secondary market performs well.

Pricing: The price of securities on the secondary market depends on the demand and supply of securities. There is obviously a strong market request for companies that have high growth prospects and profits. This is why the share prices of these companies are comparatively high.

Fund Mobilisation: It participates in the country’s economic growth by allocating investors’ funds in the most productive and profitable sector, i.e. industrial and business institutions, that facilitate investment savings mobilisation, resulting in the formation of capital.

In conclusion, we can say that the secondary market is the lifeblood of the whole economy, which reflects economic trends and provides free marketability and securities negotiability.

Safety of transactions: Because trading between members with a high level of transparency is carried out via a highly encrypted electronic system, it ensures that it is completely safe and secure under Exchange Board regulations and regulations.

The Secondary Market keeps records of transactions that are regularly conducted in several financial instruments, providing the media with comprehensive information on its prices and volume of sales, ensuring that securities are purchased and sold to investors quickly and rationally and keeps them up to date on the current market price.

It also provides guidance and education to people who are willing to invest, where to invest their funds, when and how to obtain better returns.

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