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- The function of securities market is to channelize the funds from the surplus units to the deficit units. An efficient securities market encourages savings and investments, it also efficiently allocates resources in different investment avenues and thus accelerates the rate of economic development. The market can be segmented into Primary Market, and Secondary Market.
- The primary market is the new issue securities market. Hence, the security is purchased directly from the issuers of the securities.
- The secondary market is also referred to as the stock market where dealings in shares are taken up. It creates liquidity in the security market. It means, through this market, the securityholders can find buyers for trading the securities.
- Over-the-counter market refers to stocks that trade via a dealer network as opposed to an exchange. In this market debt securities, bonds and other financial instruments such as derivatives are traded through a dealer network. It means trading of financial instruments such as stocks, bonds, commodities or derivatives take place directly between two parties.