Ad Code

Ticker

6/recent/ticker-posts

Secondary Market | Meaning, Definition, Features, Functions, Types & Trading and Settlement Procedure

Secondary Market


What is Secondary Market ?


It is a market set-up which is very much organised and caters the buying and selling of the securities. It refers to a market where the activities of buying and e selling of the securities is carried-out in a systematic and simplified way as per the directions of the SEBI. Stock exchange/secondary market is the classification of capital market. A stock exchange may also be en termed as the stock market or the secondary market.

Definition of Secondary Market/Stock Exchange


According to Securities Contract (Regulation) Act, 1956 :
"Stock exchange/Secondary market means anybody or individuals whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying and selling in securities".

Features of Secondary Market


Following are the main characteristics of secondary market/stock exchange : 
  • The beginning of the security does not take place through this source i.e., Stock exchange.
  • Stock exchanges engage in formerly issued securities.
  • Stock exchange delivers liquidity to the investment and augments the marketability of securities.
  • Securities are not allotted directly by the corporation to investors.
  • Securities are traded by the current investors to other investors.
  • The proposing buyer and seller can purchase and sell securities via brokers. 
  • Stock exchanges are not considered as the direct source of generating capital.
  • Secondary market simply transmits existing securities between buyers and sellers.

Functions of Secondary Market


Following figure depicts the varied roles and functions of the secondary market/stock exchange :

Functions of Secondary Market

1) Generation of Cash : 
In a stock exchange, the shares and the securities can be converted into. cash. It is a market place where numerous buyers and the sellers are available and those who want to sell their holdings can get the same processed without much time and their cash is generated instantly. This feature is quite essential otherwise investors would have feared from investing in the market and the surplus lying with them would have remained idle.

2) Availability of Securities : 
For securities, stock exchange serves as the means to a ready market. Initially, when the securities get the approval of being listed, it may change as many hands. Both the buyers and the sellers of the securities are readily available at the stock exchange for trading purpose.

3) Analysis of Securities : 
Different securities may be quoted differently at different stock exchanges. Thus, the owner of the securities always has an idea as to what will be the ideal price of his holdings. The price of the security varies as a result difference in the demand and supply of the security. Stock exchange provides the exact analysis for any of the security listed there.

4) Mobilizing Surplus Funds : 
Stock exchanges are means to ready market i.e. any investor having any surplus funds to invest can in the market any time and can purchase the desired quantum of the securities. The buying as well as the selling prices is quoted at the stock exchange and the same are exercised for trading. It serves as one of the options that are available to the investors for the investment of the surplus funds.

5) Raising Funds : 
Both the existing and the new companies requires funds for their growth and expansion. The funds can be obtained through this type of market as many investors are ready to serve the purpose.

6) Safety in Dealings : 
All the transactions that take place at a stock exchange are carried under the umbrella of Securities Contract Regulation Act, 1956 which lays down the provisions and the manner in which the transactions are to be dealt, thereby leaving no room for manipulation. The contract parties are mentally free as they are assured about the transparency.

7) Listing of Securities : 
At the stock exchange, trading can be done with only those securities that are listed. So, if a company wishes that its security should be available for buying and selling purpose, it should get the same listed at the stock exchange which is done after a careful scrutiny of the management and after considering the capital structure and future prospects of the company.

8) Trading of Public Debt : 
In the recent times, stock exchanges have become an important source of raising the public debt due to the lot of interference of government. Thus, public debts. (government securities) are also traded in stock exchange through the brokers.

9) Disclosure of Business Information : 
In case of the companies, where the securities are listed on the stock exchange, they have to periodically provide the information relating to the annual reports, financial statements and others statements as directed by the stock exchange. On the basis of the information submitted by the stock exchange, they decide about their policies for the future.

Types of Securities Traded in Stock Exchange/ Secondary Market


Following are the different types of securities that are listed and traded on the stock exchange :

1) Classification on the Basis of Issuer :

i) Industrial Securities : 
Such securities are issued by the industrial undertakings of both the public and the private sectors. 

ii) Government Securities : 
These securities are issued by the Government undertakings. They are usually risk-free in nature and thus carry a low rate of return.

iii) Financial Intermediaries/Securities : 
In the recent past, the emergence of financial intermediaries can be progressively noticed and to sponsor the activities, securities are also issued by them. This category comprises of the banks and other financial institutions. and the risk and reward lies somewhere between that of the industrial and the government securities.

2) Classification the Basis of Maturity :

i) Short-Term or Money Market Securities : 
It comprises of treasury bills, certificate of deposits, commercial bills, commercial papers, etc.

ii) Long-Term or Capital Market Securities : 
It comprises of equity shares, preference shares, bonds, debentures and other capital market instruments.

3) Classification on the Basis of Settlement of Deals :

i) Forward Securities : 
When the settlement date of some securities can be postponed to the next settlement period by paying some additional charges they are referred as forward securities. They are also known as the forward section shares, A shares, specified shares.

ii) Backward Securities : 
Those securities where the settlement date is fixed and cannot be shifted or postponed, those are called as backward securities. They are also referred as the cash section, B shares group and non-specified shares.

Functioning/Trading and Settlement Procedure in Stock Exchange 


The mechanism of trading done at the stock exchange/secondary market is as follows :

Trading Procedure 


In order to carry out trading at the stock exchange, the investor is required to have some basic knowledge of the operations at the stock market. The existing or the new securities can be either purchased or sold only through the members dealing at the stock exchange which may have any status that of an individual or partnership. Unless the investor is registered to carry out trading on his own, he must use the services of any of the members for trading purpose. Any trading is carried on under the yardstick of the statutory compulsions imposed by the stock exchange. Members are also referred to as the brokers and they are permissible to trade only in the listed securities. Customer's orders relating to buying and selling are executed and they receive commission against the services rendered by them. Nearly 25% of the total members of the stock exchange hold specialization in making a market. To build the relation between the investor and the broker there is a need of a transaction (i.e., the activity of buying and selling of securities) which is also referred to as the trade. The power to select the broker lies with the individual investor. The following steps enumerate the procedure for trading at the stock exchange :

1) Finding a Broker : 
A broker is compulsorily required for trading at the stock exchange. So, trading at the stock exchange initiates with finding a broker, who can carry out the transactions on behalf of the investor.

2) Select the Broker : 
There are a large number of brokers that are available to carry out the transactions. It is up to the investors to select one broker based upon their credit-ability. However, the following yardsticks can prove to be helpful :
  • Facilitation services like payment pick-up and early disbursement.
  • Rate of brokerage.
  • Other facilities like online trading, funds transfer, online access to ledger accounts.
  • Advisory and recommendations functions.
  • Staff is capable and skilled.
  • Ease in approaching and contacting.
  • Knowledge regarding capital market and future projections.

3) Opening an Account with Broker : 
After the selection of the broker is done, the next step is opening a trading account with the broker. For such purpose, the relevant KYC documents are required account broker to be submitted. Opening of the trading indicates that the investor authorizes the to purchase and sell securities on his behalf. Once the trading account is opened, the investor is issued a unique client code and the same is required to be mentioned while carrying out any of the transactions.

4) Opening a Demat Account : 
Since 2002, it has been made mandatory to hold all the securities in a demat form i.e., the physical form has been terminated. Demat signifies electronic holding of the securities. Such demat account can be opened with a bank or a Depository Participant. All the holdings of the investor will be kept in an electronic form in the demat account. Any physical shares lying with the investors need to be converted into the demat account, only then it can be sold further. For conversion, the same is required to be dispatched to the registrar through the broker.

5) Placing an Order : 
Whenever the investor sees an opportunity and finds that a stock is being traded at a price that is quite low from his benchmark, he asks the broker to purchase the securities on his behalf and the price is paid within the settlement period. Care should be taken while placing the order to mention the unique client code issued earlier.

6) Execution of the Order in the Stock Exchange : 
Generally, the investor quotes the price at which he is willing to purchase. The same is then matched with the willing seller who is ready to sell at that designated price. If both match, a trade takes place. For example, a buyer while placing a purchase order has quoted 100 shares of ABC Lid. at 160. The same order will be put in the queue. Then a seller arise who is willing to sell 100 shares of ABC Ltd. at 60, the trade will take place. Now supposing, the seller quotes a higher price, then the trade will not take place. So, for a trade to happen, it is necessary that the ordered price and the quantity should match with the sellers quantity and the price.

Different Type of Orders :

The orders can be categorized as :

i) Market Order : 
It is the type of order where the broker is intimated to purchase or sell certain quantity of the shares on behalf of the investor immediately. Broker in this case expected to adhere to due diligence and the best price for the investor as and when placing of the order is done. When the investor places an order, it is quite certain the shares will be purchased but there can be a slight variation in the price. Market orders are also referred to as the day orders which means the validity of the orders last only for that particular day.

ii) Limit Order : 
In this type of order, when as order is placed by the investor, certain limit is also specified with instructions to make the contract at the price specified or even lower than the specified price. However, in case of a sell order the limit is to sell the securities ac the specified price or higher than that price. So, in a way, both at the time of purchase or sale a limit is specified to execute the transactions. In case, the desired price never occurs, the contract is not executed. Thus, this does not guarantee a contract.

iii) Stop Order : 
In this case, a stop price needs to be specified by the investor. If the contract is for a sale, the price must be less than the market price, similarly, in case of a purchase: it must be above the market price. At a later stage, if someone trades in the same security, and the stop price is reached, the contract is executed. So, stop order basically denotes a market order that is conditional.

iv) Stop Limit Order : 
It is an improvement over the stop order. The investors under this are provided more specifically the associated price alongside a stop order. Apart from one, the investor is specified two prices i.e. a stop price and limit price. As and when some other investor trades or reaches at stop price. a limit order gets created alongside a limit price. So, it can be said that a stop order is merely a limit order with further condition.

v) Day Order : 
Under this, usually an order is placed to purchase or sale at a certain price or even better than that price. If, during the day, the price is not reached, the order expires. All orders placed with the broker. usually adopts the nature of day order unless the same is instructed to be GTC.

vi) Good-Till-Cancelled (GTC) Order : 
It is similar to a day order, but the difference being that the same remains open till execution or cancelled by the investor himself. These types of orders require a semi-annual confirmation. However, the dates are communicated by the stock exchange. These orders are also referred as the open orders.

vii) All-or-None Order (AON) : 
In this type of order, the investor wishes that the entire lot of the order for purchase or sell to be executed. This requires close monitoring by the floor broker so that the exact quantity is booked at the desired price of the customer. Such orders need too much time for execution.

viii) Immediate-or-Cancel (IOC) : 
This type of order requires immediate execution and even if the execution is partial, the same is acceptable. The part of the order that could not be executed gets cancelled.

7) Receiving Contract Note : 
After the execution of the trade, the client gets informed about the trade by way of execution of a contract note. It is basically a written acknowledgement of trade being conducted on behalf of the client during the day. It contains all required details like client unique code, client's name, details of the transactions, entered into, effective price, brokerage and other charges levied and the payment required to be made by the investor.
Statutory guidelines are required for delivery of the contract notes within 24 hours of the day trade. If the same is not abided by, the broker is penalized by stock exchange. With the advancement in the technology, in the present. time, such contract notes are delivered through e mail to the investors.

8) Payment for the Shares Bought, or Delivery Instruction Slip (DIS) for Shares Sold : 
After receiving of the contract notes, it is now the duty. of the investor to discharge the obligations by making the payment for the securities purchased by the following day (using T+1 settlement mechanism). Once the broker collects the payment from the investor, the same is required to be submitted to exchange by the next day using T+2 mechanism.
In case, the shares are being sold by investor, the same needs to be delivered to the broker to ensure that the same are remitted to stock exchange and converted in the mode of the payment. These shares are then reduced from the demat account and DIS (Delivery Instruction Slip) is to be given to broker by investor in T+1 days. DIS S contains the complete particulars about the shares that are to be reduced along with the client code. The signatures are then matched with that in the records of the DP. If the same is found to be correct, the transaction is finalized.

9) Receiving Shares or Funds on T+2nd Day : 
A settlement mechanism of T+2 days is followed in India. The buyers of shares on the trading day will be credited with the shares in their respective demat accounts after 2 days. In the same way, the seller of the shares will receive the payment after the expiry of 2 days. For example, if trading is done on Monday, settlement will take place on Wednesday. This complete the whole process of trading at stock exchange.

Settlement Procedure 


Settlement is a procedure wherein the securities themselves or the interest on the securities is to be handed over only after a receipt of payment so as to complete the obligations arising out of the contract. This requires the securities to be delivered to fulfill the contractual obligations. It further requires the payment price to be paid-off. Trading requires purchase and the sale of the securities which further leads to the settlement.

Settlement can be defined as, "The exchange of cash or assets in return for other assets or cash and transference of the ownership of those assets and cash".

Presently, the settlement procedure is happening much faster than before in some of the other country markets. Time lag in trading and the settlement is almost getting vanished day by day. In case of marketable stocks, the settlement is usually done in 2 days of the execution of the trade and 1 day in case of government securities and listed options. During the period of settlement, one may counter several risks which are taken care by the clearing process. Clearing refers to the modification of the contractual obligations which brings facilitation in the settlement process i.e., netting & novation.

Settlement Process in India 


In Jan. 2000, rolling settlement was introduced by SEBI which means that the transactions need to be settled on daily basis. The concept of "badla' i.e., carrying forward was prohibited. Earlier the settlement procedure which was of T+ 5 days was initially reduced to T+3 days and further to T+2 days.

The procedure for settlement was undertaken by the clearing house of stock exchange. National Securities Clearing Corporation Limited (NSCCL), a subsidiary of NSE was allotted with the responsibility of clearing and settlement. The aspect of clearing is basically intended for : 
  • The members who are due to deliver.
  • The members who are due to be receiving on the due date.
During the course of the settlement, both the funds and the securities inter change with each other.

NSCCL is responsible to account for dues and the pendency towards the members and further ensures that the obligations meets the timeline. To facilitate this, it itself becomes the counterparts for settling the obligations of the trading members. This is also called Novation.

The day on which buying and selling of securities carried out is known as trading day. The clients make payment to their brokers after I day of his trade take place Le.. T+1 day and the broker send this payment to the exchange after 2 days of trade takes places i.e... T+2 days and same happens in case of sale of securities too. The process goes through demat accounts (receiving and selling the shares). This completes the settlement of trade.

Major Stock Exchanges in India


The buying and selling of the shares and securities is done at the stock exchange which means a marketplace where the buyers and the sellers take their securities. Stock exchanges are floated as a body corporate or as the mutual organisation which is specialized in the business of trading in securities. Various securities of the public and the private sector are listed at the stock exchange and all the activities of the stock exchange are controlled and monitored by SEBI. In India, the two major stock exchanges/Types of secondary market are :

Major Stock Exchanges in India

National Stock Exchange (NSE)


In terms of the trading numbers, NSE (National Stock Exchange) is the largest stock exchange in India. The traders and investors are provided with the service of trading in multiple securities which includes the debt and equity that issued by the central or the state government. Apart from this, trading can also be done in commercial papers, commercial bills, certificate of deposits, etc. Around 1000 members are listed at the NSE and the exchange is owned and managed by more than 20 financial and insurance institutions. Basically. investors approach NSE for dealing in 3 types of segments i.e. capital markets, F&O, wholesale debt. The operations at NSE began in the year 1994.
The National Stock Exchange was promoted as a joint stock company under the Companies Act, 1956 and was initially promoted by ICICI, IDBI, IFCI, LIC, GIC, SBI, SBI Capital Market Ltd., IL & FS, SHCIL. In 1993, it was initially given approval for a span of 5 years by Government of India IDBI in regard was appointed as the lead promoter of the NSE. IDBI further appointed a Hong Kong based consulting firm in the name of M/s International Consulting Securities Ltd. to develop the infrastructure required for operations at the NSE.

Features of NSE


National Stock Exchange has the following features : 
  • NSE accounts for nearly 66% of the total turnover in India and has the largest network of terminals in the country which is followed by BSE at 33.4%.
  • NSE stands as the second largest exchange globally in terms of market capitalization.
  • The concept of screen based trading Le. online trading was first adopted by NSE. 
  • On Nov 3, 1994, it started the operations in the capital market segment.
  • NSE has equity capital of 25 crores. 
  • NSE was jointly promoted by SHCIL and IL&FS.
  • NSE holds NSCCL as a subsidiary to take care of the clearing and the settlement operations which started functioning in April 1996.
  • NSE holds an amount of 300 crores in Settlement Guarantee Fund to ensure the settlements are made in a smooth and uninterrupted manner and the defaults are taken care of.
  • NSDL was promoted by NSE to handle the demnat activities. 
  • The headquarters of National Stock Exchange is situated in Mumbai and Chennai holds the back office.
  • NSE is basically professionally managed which is not there with other stock exchanges and the management is different for the brokers. 
  • Since NSE is a joint stock company, it also pays taxes. 
  • A company should have capital of 10 crore and a market capitalization of 25 crore if it wishes to get listed at the NSE, if the same is already listed at some of the other stock exchange.
  • At National Stock Exchange, very strict norms are followed for the listing and disclosures. Manipulation, insider trading price rigging is comparatively quite less.

Advantages of NSE 


National Stock Exchange has the following advantages :

1) Wider Accessibility : 
VSAT technology is used at NSE for trading purposes. All the computer sy linked through satellite communication channel and the transactions takes place in real time.

2) Screen Based Trading : 
The buying and selling prices are displayed at the computer terminals. All oder records also exist inside the computer and without taking much time customers' requirements are fulfilled.

3) Non-Disclosure of the Identity : 
It is ensured that the identity of the traders is not displayed to others.

4) Transparent Trading : 
NSE follows the concept of full transparency. The timing and rate at which the deal strikes, other related expenses like brokerage, stamp duty, etc. are displayed to the investors.

5) Matching of Orders : 
When a purchase order is made inside the system, it then further searches for a relevant sales order. Both the orders are then co-related and a transaction is executed with the permission of the investor.

6) Effective Settlement : 
In case of a monetary benefit like interest, dividend, redemption amount, any claims on objections made by the company, the credit entries are directly made in the client's portfolio.

7) Trading in Dematerialised Form : 
As per the SEBI guidelines, trading is now made mandatory in the demat form and the settlement is made on the basis of (T+S) system.

8) Facility of SGL : 
NSE provides the facility of the Subsidiary General Ledger (SGL) wherein the trading done by the retail customers and the trusts is settled by way of electronic book transfers.

Bombay Stock Exchange (BSE)


BSE (Bombay Stock Exchange) was the first stock exchange that was set up.in Asia. In the year 1875, it was basically formed as the "Native Share and Stock Brokers Association". During the course of its journey, BSE has been highly responsible for the growth and development of Indian economy and the corporate sector as it has duly access to a mechanism for fund raising.

Presently, more than 6000 companies are listed at BSE and that makes it the biggest stock exchange when considering the size. While talking about the volume of the transactions, it is 5th largest in the world. In terms of listed companies' market capitalization, it falls in the top 10 list globally. The aggregate of the market capitalization of the companies listed at BSE is 1.28 trillion in Feb 2010.

The first stock exchange in India to get an ISO 9001:2000 certification is BSE and it is also the first in the country to receive ISMS (Information Security Management System). The index of BSE is SENSEX. At BSE, trading in F&O is also provided and recognized.

Features of BSE


Bombay Stock Exchange has the following features : 
  • BSE is the oldest stock exchange in India.
  • Bombay stock exchange is the 5th largest stock exchange globally. 
  • More than 6000 companies are listed at BSE.
  • In India, BSE was the first stock exchange to introduce the concept of Equity Derivatives.
  • BSE was the first one to launch Internet Trading, USS trading at the BSE index and the Free Float Index.
  • BSE was the first in the country to get the ISO 9001:2000 certification for clearing, surveillance and settlement.
  • The concept of financial training was first adopted by BSE.
  • The system of BOLT (BSE online trading system) was adopted by Bombay Stock Exchange and it was one of the limited stock exchanges to use the system.

Services Offered by BSE


The services offered by bombay stock exchange are as follows : 

1) Investor Services : 
The department of investor services helps the investors by resolving their grievances. 

2) Indo Next : 
The Indo Next is launched for helping the Small and Medium Enterprises for raising the equity and debt and also for facilitating trading in these enterprises.

3) BSE Training Institute (BTI) : 
BTI provides training in capital market and trading and certification by the help of various business schools and universities. They offer 40 courses on various types of the capital market and financial sector.

4) BSE On-line Trading (BOLT) : 
BOLT helps in on-screen trading in securities. The BSE On-line Trading is working in 8,000 trader workstations present in 409 cities in India.

5) BSEWEBX.com : 
The Exchange introduced the world the first centralized exchange based on Internet trading system in February 2001 known BSEWEBX.com. It helps the worldwide investors to trade on BSE platform.

6) BSE On-line Surveillance (BOSS) : 
BOSS anticipates the real time basis price movements, volume positions and member position and real time measurement of default risk, market reconstruction and generation of cross market alerts.

Difference between BSE and NSE


Basis of Difference

BSE

NSE

Automation

The BSE is not fully automatic.

 

The NSE is fully automatic electronic order processing exchange.

Major Index

The BSE has SENSEX a major index. It includes 30 scrips from different sectors.

The NSE has Nifty as major index. It includes 50 scrips from different sectors.

Number of Listing

It has the listing of over 4000 stocks with it.

 

It has more than 2000 stocks from different sectors listed with it.

Year of Operation

Its operations started from 1964 onwards taking base of 100.

It operations started from 1994 from taking base of 1000.

Regulatory Body

The regulatory body of BSE is SEBI.

The NSE has its own regulatory body as it works according to its own rules and regulation for trading.


Important Stock Indices in India


The investors are concerned about the market movements. This concern of the investors in the board market movement arises from the general observation which leads to various prices to move together. The general movement of the market is measured by the indices showing the overall market or the part of it. The two famous market indices in India are :
  1. Sensex
  2. NSE Sensex/Nifty

1) Sensex :
The Sensex shows the stock of various companies of the BSE. The increase or decrease in Sensex shows the increase in the price of stock of major companies in the BSE respectively. The Sensex shows the major stocks of the Bombay Stock Exchange (BSE) while Nifty shows the major stocks of the National Stock Exchange (NSE).
The headquarters of BSE is present in Mumbai. There are various stock markets present in India like the Calcutta Stock Exchange, etc. The BSE and NSE are most famous as major trading is done over here in India. There are various other indexes except Sensex and Nifty. The BSE Mid-cap Index shows the increase or decrease in the mid-cap stocks. There are other indexes also. They can be for metal stocks, FMCG stocks, automobile stocks etc.

Objectives of Sensex

The Sensex acts as measure of Indian Capital Market which is recognized widely among individual investors, institutional investors, foreign investors and fund managers. The basic objective of the index is as follows :

i) Measure Market Movements : 
The Sensex is useful for measuring the market movements. It reflects the increase or decrease in the Indian Stock markets.

ii) Benchmark for Funds Performance : 
Sensex acts as the benchmark for funds' performance. It is helpful in comparing the performance of two funds. It basically shows the funds of blue chip companies.

iii) Index bused Derivative Products : 
Sensex also shows the index of derivative products. The first derivative product of the country known as Index Futures was introduced by Sensex. Various institutional investors, money managers and small investors depend on Sensex for special work.

BSE Sensex

BSE is the oldest stock exchange of Asia. The BSE Sensex is the stock index which is managed by the Bombay Stock Exchange. The headquartered in Mumbai. The BSE Sensex is also known as BSE 30 that is broadly used in Asia and is the most important stock index in India. The Bombay Stock Exchange has 4,800 Indian companies listed. The total equity market capitalization of Bombay Stock Exchange is $1.005 trillion. The Singapore Exchange has acquired the strategic investment in the BSE.
The Stock Index was launched by Bombay Stock Exchange in 1986 which has now become the import stock index of India. The Sensex is according to the market capitalization weighted. method. It comprises of the stocks of big and financially stable companies. The Sensex is calculated with the help of free-float market method from September 2003.

The securities of public limited companies, central government, state governments or other financial institutions are listed in the BSE. The various objectives to list a security in BSE are as follows : 
  • The complete information is given to the investors for protecting their interest
  • It helps in providing the liquidity to securities. 
  • It helps in preparing the savings for economic development.

2) NSE Sensex/Nifty :
Nifty is used for measuring the fund portfolios, index based derivatives and index funds. It has 50 stock indexes accounting for 21 sectors of the economy. The joint venture between NSE and CRISIL has formed India Index Services and Products Ltd. (ISL) which has helped in owning Nifty. IISL was the first Indian company which has aimed on the index as the basic product. IISL is in marketing and licensing agreement with Standard & Poor's (S&P) who are the world leaders in index services.

The major companies of NSE are indicated by Nifty. Nifty shows the performance of top stocks of the NSE. The NSE is present in Delhi. NSE has also made the index services firm called as India Index Services and Products Limited (IISL) and has made various stock indices which include the following : 
  • S&P CNX Nifty
  • CNX Nifty Junior
  • CNX 100 (=S&P CNX Nifty+CNX Nifty Junior)
  • S&P CNX 500 (=CNX 100+400 major players across 72 industries)
  • CNX Midcap (introduced on 18 July 2005 replacing CNX Midcap 200) news.
The index is made by India Index Services Product Ltd (IISL) and Credit Rating Information Services of India Ltd. (CRISIL). The CRISIL has a strategic alliance with Standard and Poor Rating Services. Thus, the index is known as S & P CNX Nifty. S&P CNX Nifty is controlled by India Index Services and Products Ltd. (ISL). It has 50 indexes which are made on April 22, 1996. It has the following objectives :
  • It shows the correct movement of the market.
  • It is helpful for the fund managers in measuring the performance of portfolio. 
  • It helps in introducing the index based derivatives.

Difference between Primary Market and Secondary Market


Basis of Difference

Primary Market

 

Secondary Market

Issues

Primary market transacts only with new issues. Issues are fresh or new when such issues are made for the first time either by the new company or by the existing company.

It deals primarily in existing securities.

 

Location

 

It does not require any fixed geographical location.

It requires a fixed place to carry out their trading.

Transfer of securities

 

Securities are created for the first time and are transferred from corporate to investors.

 

Securities are transmitted from one investor to another through the use of stock exchange mechanism.

Entry

All companies can come into new issue market and offer fresh issue of securities.

Securities are required to be listed for their trading in secondary market.

 

Administration

 

It does not have any tangible administrative set-up.

 

For the purpose of facilitating trading, it must has a definite administrative set-up.

Regulation

It is governed by regulatory bodies such as SEBI, Stock Exchanges, Companies Act, etc.

It is regulated both inside and outside the stock exchange structure.

 

Aim

 

It creates long-term instruments for borrowing.

 

It offers liquidity by providing marketability to its instruments.

Price Movement

Pricing of new issues is affected by stock price movements in secondary market.

Stock prices are affected by micro and macro price movements.

 

Depth

It varies with the number and the volume of issue.

 

Depth is contingent upon the actions of the primary market as it brings in more corporate entities and more financial instruments for raising funds.


Post a Comment

0 Comments