Secondary Market defined
“Secondary markets have attained increased importance because they are taken to be one of the important indicators that give a true picture of the industrial development of a nation. ”
Secondary markets are those markets that trade the preliminary securities issued by different companies. Trading of securities has the usual meaning of buying and selling.Secondary markets have attained increased importance because they are taken to be one of the important indicators that give a true picture of the industrial development of a nation. NYSE (New York Stock Exchange), London Stock Exchange, BSE (Bombay Stock Exchange) are some of the prominent secondary markets of the world.
Actually what happens is that the financial instruments of companies (securities) are the prerogative of the primary market. The methods like IPOs (Initial Public Offers) and private placement are used by the investors to buy these financial instruments.
After that these investors are not in the habit of keeping these securities unto themselves. They sell these to another investors via the secondary market with an aim to reap rich profits.
Various types of securities and financial instruments like Bonds, Equity Shares, Preference Shares, Bonus Shares, Debentures etc. are frequently traded in the secondary market. Leading economists and government officials show keen interest in the reports of the secondary markets with a view to know more and more about the prevailing health of the country’s economy.
A country usually has a number of secondary markets but only a couple or so are considered to be most important. These are the markets that are gauged by foreign investors who want to invest in a country.
Heavy duty secondary markets like the NYSE have the potential of sending jitters throughout the world in case some untoward circumstances take place in them. It is because companies that operate at the global level are often associated with these giant secondary markets.
Any company that wants to trade its securities in the secondary market has to get listed with it. Rules regarding listing vary from country to county but the basic framework is almost the same.
Listing enables companies to win the faith of investors as well as the financial institutions. Winning the trust of financial institutions is considered to be a very important step for any company that wants to trade in the secondary market with success. It is for the reason that companies need to borrow frequently from various kinds of financial institutions.
Author - DeeKay
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