SECURITIES MARKETS

Financial Markets
Markets which serves to channel funds from
the from the savers to the borrowers.
Alternatively we can say that these markets
used to channel funds to those who can utlize
them optimally.

Financial Markets
Financial markets can further be divided into
two categories,
Primary Market
Secondary Market
Primary Markets

The market in which a borrower issues new
securities for cash from an investor (buyer)
Primary Markets
Important Terms
Initial Public Offerings
Investment Banker
Underwriting
Prospectus
Primary Markets
Initial Public Offerings (IPO)
If the issuer of the security is selling he
securities for the first time, it is referred as
Initial Public Offering (IPO). For example,
common stocks of any company being sold for
the first time.
Primary Markets
Investment Banker
Investment banking firms are specialized in
the design and sale of the securities in the
primary markets while operating
simultaneously in the secondary markets.
Primary Markets
Underwriting
The process in which the investment bankers
acquires securities which are issued by some
company, and then they resell them to the
public (individual or at times institutional
investors). Thus they transferred the risk of
reselling from the issuers to themselves,
against which they used to use charge the risk
premium.
Primary Markets
Prospectus
It provides all the necessary information about
the IPO to the potential investors. They are
been made after all the regulatory
requirements for the IPOs are fulfilled.
Secondary Markets
Once the securities are been issued; a suitable
mechanism is required to sell those securities.
Secondary markets are the places which are
used to serve this purpose.
Thus it is the place at which the stocks, bonds
and derivatives, which are once issued can be
re traded.
Secondary Markets
Types of Secondary Markets
Equity Markets (Auction)
Equity Markets (OTC)
Bonds Markets
Derivatives Market
Secondary Markets
Equity Markets (Auction)
An equity market ( i.e. where common and
preferred stocks are traded), via bidding
process at some physical location- the stock
exchanges.
Investors are represented here by brokers
which take part on behalf of the customers in
the bidding process.
Secondary Markets
Equity Markets (Over the Counter)
The Over the Counter (OTC) market is a
negotiated market- the market comprising of
the dealers, where the network of the dealers
stand ready to buy and sell securities.

Secondary Markets
Bond Markets
Alike the shareholders in an equity market,
the holders of the bonds do need a secondary
market, for reselling and repurchasing the
bonds which are once issued.
It is interesting to note that the growth in
bond markets is not linked with the growth in
economy, instead it is linked with increase in
inflation rate.