SHARETIPSINFO >> Articles Directory >>Understanding primary and secondary market
In today’s world where finance has assumed a position of prominence, it becomes necessary that you start learning whatever you can about the finance world. Today, finance has become the latest buzzword. So much so, that the main debates and discussions between people are usually related to finance. As such, if you want to become successful in the present day, it has become essential that you acquire all the knowledge you can about the financial word. Usually when we use the term finance, we actually refer to the financial market. The financial market consists of many institutions, instruments, and markets. Financial institutions referred to here, ranges from the money lenders that were found in earlier times to the stock exchanges that have replaced the money lenders. On the other hand, the financial instruments mentioned here, refers to the coins, currency, notes, cheques, credit cards, etc. However, these were only the basics that everyone knows. In order to attain success in the financial world, this knowledge, is not enough. You have to learn about the more complex and important terms in the financial market. Two such important terms in the financial market are the primary market and the secondary market. As such, understanding primary and secondary market has become essential
Registered stock exchanges
Only those companies can issue shares, which are listed in the registered stock exchanges. It is to be noted here that only those companies can issue shares, for the purpose of subscription by the public, which are listed in the registered stock exchanges across the world. Stock exchanges can be defined as the market where the securities, that includes both government as well as other corporate securities, traded. That is, in other words, stock exchanges are the place where the securities are either bought or sold. All companies that are willing to raise money from the public should, at first be listed in these stock exchanges. This is because, only on being enlisted in the stock exchanges, it is considered as registered and legal.
Rules and regulations
Trading in these stock exchanges takes place as per the prescribed rules, regulations, and norms. As such, companies that are not listed in these stock exchanges cannot raise money by way of public subscription. Since the trading in these stock exchanges takes place as per the prescribed rules, regulations, norms that are specified for every transaction, the dealings in the stock exchanges are thus more or less safe. As such by investing in these stock exchanges, the investors are at a lesser chance of being duped by frauds or cheaters in the stock exchanges. However, the stock exchanges are allotted the trading rights in certain areas or regions only. As such, there are many regional stock exchanges; besides the ones that fall under the category of stock exchanges with a national presence
The term financial market can be broadly classified into two heads. We frequently come across the terms like the share, stocks, debentures, etc that is why we also have a good knowledge about these terms as well. Since, in the present day we do not much use the terms primary market and secondary market, we are not well versed with this terms. As such learning them in details has become essential. Generally, the term financial market can be broadly classified into two heads. These two heads are known as the capital market and the money market. Now, the term capital market can be further divided into the primary market and the secondary market.
Primary market is known as the new issue market
Before we discuss about the more complex stuff and go into the more detailed description of the primary market and the secondary market, let us at first discuss about them in details. The primary market, in the present day, is also known as the new issues market. The primary market is known as the new issue market because, this market deals in only those securities that have been newly introduced. That is, in other words, they deals in those shares, stocks, debentures, bonds, etc, that have never previously been issued or offered to the public. On the other hand, the secondary market is another name for the stock market. Thus, understanding primary and secondary market is essential
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