Thursday, 23 January 2020

Unit 2: Securities Market: An Overview


Unit 2: Securities Market: An Overview

The global securities market has been constantly evolving over the years to serve the needs of traders.

Traders require markets that are liquid, with minimal transaction and delay costs, in Notes addition to transparency and assured completion of the transaction.

Based on these core requirements, a handful of securities market structures have become the dominant trade execution structures in the world.

The government securities market has witnessed significant transformation in the 1990s.

With giving up of the responsibility of allocating resources from securities market, government stopped expropriating seigniorage and started borrowing at near-market rates.

Government securities are now sold at market related coupon rates through a system of auctions instead of earlier practice of issue of securities at very low rates just to reduce the cost of borrowing of the government.

Major reforms initiated in the primary market for government securities include auction system (uniform price and multiple price method) for primary issuance of T-bills and central government dated securities.

As a result of the gradual reform process undertaken over the years, the Indian G-Sec market has become increasingly broad-based and characterized by an efficient auction process.

Primary Market: The primary market refers to the market that provides the channel for sale of new securities Pure Forward: Pure forward is outside the formal market.

Secondary Market: Secondary market refers to a market where securities are traded after being initially offered to the public in the primary market and/or listed on the Stock Exchange.

Short Selling: Short selling is defined as selling a stock which the seller does not own at the time of trade.

Variant of Secondary Market: A variant of secondary market is the forward market, where securities are traded for future delivery and payment.

Pure forward is outside the formal market.

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