what is a securities
Securities market means a market where financial instruments and securities are bought and sold, which are issued by commercial corporations, financial corporations, companies, central government, state governments, local bodies, commercial banks etc. Is. In other words, the securities market provides a marketing place for the purchase and sale of securities and thus ensures the transferability of securities, which is the cornerstone of the modern corporate system.
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| what is a securities |
In the securities market, shares, debentures and bonds issued by the government and corporate companies are bought and sold. Government and corporate companies issue different types of securities whenever they need finance and they buy these securities from the savings that are with the general public. Due to this the savings of the common man flow towards industrial and business institutions. Thus it is clear that securities market is the market where various medium and long term securities issued by different parties desirous of capital are bought by the general public.
what is securities market
The various components of the securities market can be explained as follows:
(1) Government Securities Market,
(2) Corporate securities market
(a) the primary market or the new issue market,
(b) Subsidiary or secondary market.
(1) Government Securities Market
Under the Government Securities Market, the securities issued by the Central Government, State Government and Local Governments are bought and sold. Under local governments, municipal corporations, municipalities, autonomous institutions, port trust improvement trusts, state electricity boards, metropolitan authorities, public sector corporations, housing boards, etc. are included.
Government securities market is called the best market, because the elements of liquidity, safety, low risk etc. are found in the government securities that are dealt in it. Also, there is no possibility of any kind of payment error in government securities. There is little speculation in the securities market, as the price margin is very low, as well as the guarantee of timely payment in respect of the principal and interest of government securities. Also called government securities, the Reserve Bank is the principal regulatory body in this market. Is.
(2) Corporate securities market
Corporate securities market is the market where shares, debentures, bonds, etc., issued by commercial companies, are bought and sold. Two major markets are included in the corporate securities market
(a) Primary Market
The primary market is the market in which shares, debentures and other securities are sold for the first time to raise long-term capital. In other words, the primary or new issue market is where companies and financial institutions issue their securities for the first time. Private companies also issue their securities in the primary market but they sell their shares to their friends, their group investors. Since this market is related to new issues, hence the primary market is also called new issue market. Both newly established and old companies raise capital through this market. The new issue market is directly participated by the underwriting entities.
The primary market is that part of the capital market that deals with the issue of new securities. Companies, governments or public sector institutions can raise funds through the sale of new stock or bond issues. This is usually done through a syndicate of securities dealers. The process of selling new issues to investors is called underwriting. In the case of a new stock issue, this sale is a public offering. Dealers earn a commission that is built into the price of the security offering, although this can be found in the prospectus. Primary markets create long-term instruments through which corporate entities borrow from the capital market.
Funds collected from the primary market are often used by companies to modernize plants, machinery and buildings, expand business and set up new business units.
(b) Subsidiary or secondary market
The securities already issued are bought and sold in the subsidiary or secondary market. This market is also known as the stock market, because securities like shares, debentures, bonds, stocks, etc. can be bought or sold only through the exchange centers. Only the securities of the companies listed on the stock exchange are dealt with. In this regard, C.D. Dekhmukh has said, “The stock exchange center is a securities market, which is responsible for buying and selling securities, making their actual valuations on the basis of demand-supply, providing security in the dealings of securities and in the value of securities. Helps in bringing mobility.
functions of securities market
The functions of securities market can be explained as follows:
(1) Mobility of Savings
Provides mobility to the small savings of the general public under the securities market and influences them in selected undertakings through different types of securities.
(2) Creation of wealth share
Capital market provides opportunities to all the investors to share in the increased wealth which is facilitated by competing private entrepreneurs.
(3) Increasing the Chances of Long-Term Success
Securities markets increase the chances of long-term all-round success by allowing an individual to diversify risk among multiple ventures to offset gains and losses.
(4) Providing liquidity
Through the securities market, it is possible to satisfy the capital requirements of the undertakings and the liquidity needs of the investors simultaneously. The liquidity that the securities market provides and the returns must be provided by the undertakings in such a way as to encourage savings.
5) Promotion of industrial development
One of the functions of the securities market is to encourage industrial development in the country by increasing the rate of capital formation, so that the internal and foreign market can be encouraged.
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2. Debt Securities
Debt securities mean debt or loan related securities such as bonds, debentures, bank notes etc. That is, in other words, if you buy a bond of a company, then you are not going to get the share of that company, you just get interest at a fixed rate.
The buying and selling of debt securities takes place under the bond market and it also works like the stock market. That is why before understanding the bond market, it is important that you first understand the stock market.
3. Derivatives
Derivatives are also a type of security. There are four types of it forward, future, option and swap where the buying and selling of derivatives takes place, we call it derivatives market.
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