The document discusses securities markets and the types of securities traded within those markets. It defines what a security is and outlines the main types: equity securities (stocks), debt securities (bonds), and derivatives. It then discusses primary and secondary markets, how new securities are issued in the primary market and previously issued securities are traded in the secondary market. The roles of security markets are also summarized as providing liquidity, facilitating capital formation and business ownership, and price discovery. Reforms to India's security markets are highlighted such as the establishment of regulatory bodies and growth of electronic trading.

1. SECURITY MARKET
Securities’ and ‘Securities Markets

2. SECURITY
 A security is a financial instrument, typically any
financial asset that can be traded.
 The nature of what can and can’t be called a
security generally depends on the jurisdiction in
which the assets are being traded.

3.  Under section 2(h) of SCRA, the term 'securities'
include the following: Shares, scrips, stocks,
bonds, debentures, debenture stocks etc. in or of
any incorporated company or another body
corporate. Derivatives. Units issued by any
Collective Investment Scheme to the investors in
such scheme.

4. TYPES OF SECURITIES
 Equity securities – which includes stocks
 Debt securities – which includes bonds and
banknotes
 Derivatives – which includes options and futures

5. 1. EQUITY SECURITIES
 Equity almost always refers to stocks and a share
of ownership in a company (which is possessed by
the shareholder). Equity securities usually generate
regular earnings for shareholders in the form of
dividends. An equity security does, however, rise
and fall in value in accord with the financial markets
and the company’s fortunes.

6. 2. DEBT SECURITIES
 Debt securities differ from equity securities in an
important way; they involve borrowed money and
the selling of a security. They are issued by an
individual, company, or government and sold to
another party for a certain amount, with a promise
of repayment plus interest. They include a fixed
amount (that must be repaid), a specified rate of
interest, and a maturity date.
 Example : Bonds, bank notes (or promissory
notes), and Treasury notes .

7. 3. DERIVATIVES
 A derivative security is a financial instrument
whose value depends upon the value of another
asset. The main types of derivatives are futures,
forwards, options, and swaps. An example of a
derivative security is a convertible bond.

8. SECURITY MARKET
 Security market is a market where securities are
issued and traded. It is the market for different
types of securities namely: Debt, Equity and
Derivatives.

9. NATURE OF SECURITY MARKET
• It Deals In Long-Term Securities
• It Performs Trade-off Function
• It Creates Dispersion In Business Ownership
• It Helps In Capital Formation
• It Helps In Creating Liquidity

10. TYPES OF SECURITY MARKET
1. Primary Market
2. Secondary Market
1. primary market, securities are created for the
first time for investors to purchase. New securities
are issued in this market through a stock
exchange, enabling the government as well as
companies to raise capital.
Example : I.P.O (Initial public offer) unlisted
company
F.P.O (Further public offer) listed
company

11. • This market is concerned with newissues.
• Therefore, the primary market is also called NEW
ISSUE MARKET.
• In this market, the flow of funds is from savers to
borrowers (industries), hence, it helps directly in
the capital formation of the country.
• The money collected from this market is generally
used by the companies to modernize the plant,
machinery and buildings, for extending business,
and for setting up new business unit.

12. FEATURES OF PRIMARY MARKET
 The issuing company receive money and provides
security certificates to the investors.
 The Primary market plays important roles to
formulate capitals to the economy.
 The Company gets investment in huge quantity.
 .The primary market helps the company to create
their goodwill.
 Price of securities doesn’t fluctuate in the primary
market.
 The Primary Market helps company to connect with
big investors.

13. SECONDARY MARKET
• The secondary market is that market in which the
buying and selling of the previously issued
securities is done. The transactions of the
secondary market are generally done through the
medium of stock exchange. The chief purpose of
the secondary market is to create liquidity in
securities.
 If an individual has bought some security and he
now wants to sell it, he can do so through the
medium of stock exchange. to sell or purchase
through the medium of stock exchange requires
the services of the broker presently, their are 24
stock exchange in India.

14. FEATURES OF SECONDARY MARKET
 Gives liquidity to all investors. Any seller in need of cash can
easily sell the security due to the presence of a large number
of buyers.
 Very little time lag between any new news or information on
the company and the stock price reflecting that news. The
secondary market quickly adjusts the price to any new
development in the security.
 Lower transaction costs due to the high volume of
transactions.
 Demand and supply economics in the market assist in price
discovery.
 An alternative to saving.
 Secondary markets face heavy regulations from the
government as they are a vital source of capital formation and
liquidity for the companies and the investors. High regulations
ensure the safety of the investor’s money.

16. ROLE OF SECURITY MARKET
 A stock exchange provides a platform to investors to enter into a
trading transaction of bonds, shares, debentures and such other
financial instruments.
 Transactions can be entered into at any time, and the market allows
for active trading so that there can be immediate purchase or selling
with little variation in price among different transactions. Also, there
is continuity in trading, which increases the liquidity of assets that
are traded in this market.
 Investors find a proper platform, such as an organised exchange to
liquidate the holdings. The securities that they hold can be sold in
various stock exchanges.
 A secondary market acts as a medium of determining the pricing of
assets in a transaction consistent with the demand and supply. The
information about transactions price is within the public domain that
enables investors to decide accordingly.
 It is indicative of a nation’s economy as well, and also serves as a
link between savings and investment. As in, savings are mobilized
via investments by way of securities.

17. TYPES OF SECONDARY MARKET
 Stock exchanges : Stock exchanges are centralized
platforms where securities trading take place, sans any
contact between the buyer and the seller. National Stock
Exchange (NSE) and Bombay Stock Exchange (BSE)
are examples of such platforms.
 Over-the-counter (OTC) market : Over-the-counter
markets are decentralized, comprising participants
engaging in trading among themselves. OTC markets
retain higher counterparty risks in the absence of
regulatory oversight, with the parties directly dealing
with each other. Foreign exchange market (FOREX) is
an example of an over-the-counter market.

18. REFORMS IN SECURITY MARKET OF INDIA
The major reforms undertaken in capital market of India includes:-
Establishment of SEBI : The Securities and Exchange Board of India
(SEBI) was established in 1988. It got a legal status in 1992. SEBI
was primarily set up to regulate the activities of the merchant banks,
to control the operations of mutual funds, to work as a promoter of
the stock exchange activities and to act as a regulatory authority of
new issue activities of companies.
 The main functions of SEBI are:-
 To regulate the business of the stock market and other
securities market.
 To promote and regulate the self regulatory organizations.
 Toprohibit fraudulent and unfair trade practices in securities
market.
 Topromote awareness among investors and training of
intermediaries about safety of market.
 Toprohibit insider trading in securities market.
 Toregulate huge acquisition of shares and takeover of
companies.

19. • Increasing of Merchant Banking Activities : Many Indian and
foreign commercial banks have set up their merchant
banking divisions in the last few years. These divisions
provide financial services such as underwriting facilities, issue
organising, consultancy services, etc. It has proved as a
helping hand to factors related to the capital market.
• Candid Performance of Indian Economy : In the last few
years, Indian economy is growing at a good speed. It has
attracted a huge inflow of Foreign Institutional Investments
(FII). The massive entry of FIIs in the Indian capital market has
given good appreciation for the Indian investors in recent
times. Similarly many new companies are emerging on the
horizon of the Indian capital market to raise capital for their
expansions.

20. • Growing Mutual Fund Industry : The growing of mutual funds in India
has certainly helped the capital market to grow. Public sector banks,
foreign banks, financial institutions and joint mutual funds between
the Indian and foreign firms have launched many new funds. A big
diversification in terms of schemes, maturity, etc. has taken place in
mutual funds in India. It has given a wide choice for the common
investors to enter the capital market.
• Growing Stock Exchanges : The numbers of various Stock Exchanges in
India
• Investor's Protection : Under the purview of the SEBI the Central
Government of India has set up the Investors Education and Protection
Fund (IEPF) in 2001. It works in educating and guiding investors. It tries
to protect the interest of the small investors from frauds and
malpractices in the capital market.
• Growth of Derivative Transactions : Since June 2000, the NSE has
introduced the derivatives trading in the equities. In November
2001 it also introduced the future and options transactions. These
innovative products have given variety for the investment leading to
the expansion of the capital market.

21.  Insurance Sector Reforms : Indian insurance sector has
also witnessed massive reforms in last few years. The
Insurance Regulatory and Development Authority (IRDA)
was set up in 2000. It paved the entry of the private
insurance firms in India. As many insurance companies
invest their money in the capital market, it has
expanded.
 Commodity Trading : Along with the trading of
ordinary securities, the trading in commodities is
also recently encouraged. The Multi Commodity
Exchange (MCX) is set up.The volume of such
transactions is growing at a splendid rate.

22. • Establishment of Creditors Rating Agencies : Three
creditors rating agencies viz. The Credit Rating Information
Services of India Limited (CRISIL - 1988),the Investment
Information and Credit Rating Agency
of India Limited (ICRA -1991) and Credit Analysis and
Research Limited (CARE) were set up in order to assess the
financial health of different financial institutions and
agencies related to the stock market
activities. It is a guide for the investors also in evaluatingthe
risk of their investments.
• Rising Electronic Transactions : Due to technological
development in the last few years. The physical transaction
with more paper work is reduced. Now paperless transactions
are increasing at a rapid rate. It saves money, time and energy
of investors. Thus it has made investing safer and hassle free
encouraging more people to join the capital market.