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THE SECURITIES MARKET

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The term securities markets enclose a number of markets in which securities can be bought and sold.

These securities markets can be classified into four types of markets:

1. Primary market: Corporate entities offer new issues to the investing public through the issue of equity shares. After the initial issue, the securities are subsequently shifted to the secondary market, where the can be traded.

2. Secondary market: Have securities of corporate entities that are already outstanding and owned by investors. These securities can be traded (i.e. bought and sold) in the secondary market.

3. Money market: Enables trading of securities with maturity of one year or less.

4. Capital market: Securities with a maturity period of more than one year are traded in the capital market.

 

The existence of these markets is advantageous to both the issuer of the security and the investor.

The “issuers”, i.e. business entities and government need to raise funds or capital at competitive rates for productive and improvement activities, respectively. The markets allow the transfer of funds from the surplus to the deficit sectors both efficiently and at low cost.

The investors also benefit, as they are able to invest their excess funds or savings through the market in the expectation of a future return on their investments. The investors are also able to trade (i.e. buy and sell) these securities through the markets.

 
 
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