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4. secondary market

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  • 1. Introduction  The market for long term securities like bonds, equity and preferred stocks is divided into primary and secondary market. The primary market deals with the new issue of securities. Outstanding securities are traded in the secondary market, which is commonly known as stock market or stock exchange.  In secondary market, the investor can sell and buy securities. Stock market predominantly deals in equity shares.
  • 2. Functions of stock exchange Maintains active trading Fixation of prices Ensures safe and fair dealing Aids in financing the industry Dissemination of information Performance inducer Self regulating organisation
  • 3. Regulatory framework Ministry of finance SEBI The governing board
  • 4. The broker  A broker acts as a mediator between stock exchanges and investors. He purchases and sells securities on behalf of investors with their permission.  The broker has to abide by the code of conduct laid by SEBI. The code of conduct prevents the malpractice, manipulation and gives other statutory requirements.  If a broker is involved in manipulation, or price rigging or gives the false information, his registration is likely to be suspended. If the rules and regulations regarding insider trading and take over codes are not adhered to the registration may even be cancelled.
  • 5. The broker and investor Broker should provide adequate information about stock Should be capable of giving short term and long term suggestions to the investors. Ability to confirm sale and purchase of securities quickly He should be able to provide price quotes quickly He should have a good name in the society Adequate experience Should have contact with other stock exchanges to executes the orders profitably The broker should also offer incidental services like arranging for financing the clients transaction.
  • 6. Types of orders  Limits order  Best rate order  Discretionary order  Stop loss order