Thursday, January 12, 2012

Secondary market process in the stock market

What is Secondary Market ?
A place where investor purchase Securities or Assets from other investors.The buying and selling place of shares,bond debenture is the secondary market in the stock markets.
The New York Stock Exchange or NYSE, or the NASDAQ, DSE is the Secondary market place.
In the primary market prices are often set beforehand.whereas in the secondary market only basic forces like Supply and Demand determine the price of the Securities.

Which Products available in the Secondary Market?

The ownership interest in a company of holders of its common and preferred stocks.Various types of Equity are
1.Equity Share:Known as ordinary shares, represents the form of fractional ownership in which the shareholder is associated with the risk with business venture.

2.Right Share: The issuance of new securities to existing shareholders as a ratio already held.

3.Bonus Shares:Shares issued by the companies to their shareholders free of cost by capitalization of accumulated reserves from the profits earned from the previous years.

 4.Preference Shares: Owners of those shares are entitled to a fixed dividend to be paid regularly before dividend to be paid in respect of equity shares.

 5.Cumulative Preference Share:Preference shares on which dividend accumulates if remains unpaid.

6.Government Securities:These are sovereign coupon instruments which are issued by the Reserve bank on behalf of the Government.These securities have a fixed coupon that is paid on specific dates on half yearly basis.

7.Debenture:Bonds issued by a company bearing a fixed rate of interest payable usually half-yearly and principal amount repayable on particular date on redemption of the debentre.

8.Bond:Investors lend money to issuer and in exchange the issuer promises to repay the loan in a specified date including interest.

9.Commercial Paper:A short term notes issued by the big companies to raise fund for them.They provide interest for it.

10.Treasury Bills:Short term (up to 91 days) bearer discount securities issued by the government as a means of financing cash requirements.