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Security Markets
Security Markets
Security Markets
Security Markets
Security Markets
Security Markets
Security Markets
Security Markets
Security Markets
Security Markets
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Security Markets

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The global securities market has been constantly evolving over the years to serve the needs of traders. Traders require markets that are liquid, with minimal transaction and delay costs, in addition …

The global securities market has been constantly evolving over the years to serve the needs of traders. Traders require markets that are liquid, with minimal transaction and delay costs, in addition to transparency and assured completion of the transaction. Based on these core requirements, a handful of securities market structures have become the dominant trade execution structures in the world. In this article, we'll take a look at some of the most popular market structures currently in use.

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Transcript

  • 1. Security Markets
  • 2. Security Markets • There are two types of security markets • Primary markets • Secondary markets • Primary market: a market for new issues of securities • Secondary market: Trading of already issued securities among investors occurs in the secondary market
  • 3. Primary Market Following are example of primary issues: • 1. IPO: (initial public offering) refers to stock of company being offered to general public for the first time • 2. Seasoned issue: new issues are offered by companies that already have floated equity
  • 4. Primary issues • Companies may choose to sell securities either through public offering or private placement. • In private placement, the securities are offered to a some wealthy individuals or selected financial institutions.
  • 5. Advantages of Private Placement • Registration of the securities with SECP is not required • Funds can be quickly raised with private placements, IPOs takes up to 4 months • However, PP cannot be traded on stock exchange and thus have less liquidity • Because of illiquidity, higher rate of return is paid to investors
  • 6. How securities are sold in IPOs • Securities are sold to general public with the help of investment banker • Investment banker helps companies in IPOs with their advice, underwriting and distribution of securities • Investment banker underwrites the new securities by purchasing the securities from the issuing company and assumes the risk of selling to general public. Such agreement is called firm commitment • An alternative to firm commitment is best effort agreement where the IB does not purchase the securities, rather tries his best to sell securities at good price
  • 7. Secondary Market • The trading of already issued securities takes place in secondary market • Secondary markets helps the primary markets as they increase the liquidity of existing securities • Secondary markets exists for trading of common stocks, bonds, and puts and calls, • Secondary markets include brokers market, dealers markets
  • 8. Brokers market • This is also called stock exchange or • It is an association of brokers and works like an auction market • All investor must deal through brokers • No investors is allowed to directly buy or sell shares from/to other investors • Brokers charge commission on transactions they make for their clients
  • 9. NASDAQ • National Association of Security Market Dealers is a dealers market • Unlike brokers, dealers(also called market makers) buy and sell securities for themselves • Every market maker deals in number of securities and keeps a specific quantity of a given security • He stands to buy and sell a given security at the same time
  • 10. NASDAQ • National Association of Security Market Dealers is a dealers market • Unlike brokers, dealers(also called market makers) buy and sell securities for themselves • Every market maker deals in number of securities and keeps a specific quantity of a given security • He stands to buy and sell a given security at the same time

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