Buying and selling securities such as stocks and bonds takes place in one of two markets.

Learn about the difference between primary and secondary markets from the perspective of

an investor.

The term marketplace or simply market is a reference to a place where goods and services

are bought and sold. When the corporate structure was first developed in the late

nineteenth century, the term market came to figuratively mean a place where securities

such as stocks and bonds are bought and sold. The New York Stock Exchange is one

example of a market where trading takes place and is the best known market in the world.

However, other markets exist all over the globe where billions of dollars of assets are traded

annually.

Stock Exchanges

There are two primary theoretical marketplaces where securities are traded. The term

theoretical is used here because the market need not be a physical place where buyers and

sellers meet to trade securities. This is akin to references to different markets for selling

both new and used automobiles. The primary market for car sales refers to sales of cars

between the manufacturer (or a dealership) and the buyer. A secondary market refers to

used car sales and may be between any owner and seller. The point is that primary markets

refer to new sales and secondary markets refer to used sales.

A stock exchange is any legally recognized market where securities can be bought and sold.

Corporations that issue stock are traded in these markets and typically wish to be listed as

an officially traded company so that the shares of stock can be purchased by investors in a

liquid market. In addition, stock exchanges are regulated such that both companies and

investors must follow trading rules making the transition of ownership safer and less risky.

The liquidity of the market refers to the ease with which ownership of a company in the form

of stocks can be bought and sold without delay or complications afforded by selling the

stock on a one-to-one basis between each company and investor.

Primary and Secondary Markets

A primary market refers to any market where new shares of stock are sold. A corporation

wishing to sell new shares of stock benefits from this sale because the stock is sold in the

market directly by the issuing company. This is in contrast to secondary markets where

shares of stock already in circulation and issued at a previous date are traded among

investors. The company who issued the stock does not benefit directly from the sale of stock

in a secondary market because the money paid for the stock goes to the seller in exchange

for part ownership in the company. In this case, the company is not involved in the

transaction.

Buybacks and Secondary Markets

Sometimes a corporation is interested in buying or selling shares of its own stock. In this

case, the company does benefit from the transaction but the stocks are still considered to be

trading in secondary markets because the stock was issued at an earlier date. When a

company buys its own stock in a buyback, it is reducing the number of shares of stock

available for purchase in the secondary market. The company may do this to protect itself

from a buyout or to use the stock as compensation for the purchase of a new asset. Either

way it signals to the secondary markets that the value of the company is changing and

holders of the stock need to reevaluate the worth of their part ownership of the company.

Conclusion

The main difference between primary and secondary markets has to do with who benefits

from the sale or purchase of a corporation’s stock. When new stock is issued, the company

benefits from the sale and the cash flow from the sale of new stock can be used to invest in

the company’s operations. When stock is bought or sold between investors, the company

does not directly benefit from the sale or purchase because money changes hands only

between the two investors.

Securities and Exchange Board of India) 

The SEBI was constituted in 1988 by a resolution of Government of India & it was made a Statutory body by the Securities and Exchange Board of India Act 1992.

Management:-

Section 4 of the Act lays down the constitution of the management of SEBI. The Board of members of SEBI shall consist of a chairman, two members from amongst the officials of the Ministeries of the Central Government dealing with finance and law, one member from amongst the officials of Reserve Bank of India, 2 other members to be appointed by the Central Government, who shall be professionals & interalia have experience or special knowledge relating to securitia market.

Objectives:-

To Protect the Interest of investors in securities & to promote the developments of and to regulate,

the securities market for matters, connected there with or incidental there with.

Powers and Functions:-

These measures provide for:-

1. Regulating the business in stock exchange & any other securities market.

2. Registered and regulating the working of collective investment schemes, including mutual

funds.

3. Promoting and regulating self-regulatory organizations.

4. Promoting & regulating self-regulatory organizations. Prohibiting fraudulent & on fair trade

practices in securities market.

5. Promoting investors education & training of intermediaries in securities market.

6. Promoting investor education & training of intermediaries in securities market.

7. Prohibiting insider trading in securities.

8. Regulating substantial acquisition of shares and take-over of companies.

9. Calling far information from, undertaking inspection, conducting enquiries and audits of the

stock exchange & intermediaries & self-regulatory organizations in the securities market.

10. Performing such functions & exercising such power under the provision of the capital issues

(control) Act, 1947, (Subsequently repeated) and Securities Contracts (Regulations) Act.

1956 as may be delegated to it by the Central Government.

11. Levying fees or other charges for carrying out the purposes of section 11 of the Act.

12. Conducting research for the above purpose.

13. Performing such other functions as may be presented by the government.

14.

Difference Between India’s Stock Exchanges NSE and BSE

NSE and BSE are two terms that are often heard in the stock market circles in India. There are some differences between the two in terms of their functioning and principles. NSE stands for National Stock Exchange whereas BSE stands for Bombay Stock Exchange.NSE happens to be the largest stock exchange in India and the third largest stock exchange in the whole world. On the other hand BSE is the oldest stock exchange in Asia. NSE is located in New Delhi and was started in the year 1992 as a tax-paying company. NSE was recognized as a stock exchange in the year 1993 under the Securities Contract Act 1956. On the other hand BSE was established way back in the year 1875.It is situated in the Dalal Street, Mumbai.The main objective of NSE is to establish trading facility nationwide for all kinds of securities. One of the chief characteristics of NSE is that it caters to the needs of all types of investors. It achieves its objective through the appropriate telecommunication network. As a matter of fact NSE was able to achieve its goal in a very short span of time.It is important to know that NSE has a listing of more than 2000 stocks from different sectors. On the other hand BSE has a listing of more than 4000 stocks from different sectors. It is equally important to know that SENSEX is the major index of BSE and it has about 30 scrips from different sectors.

On the other hand NIFTY is the major index of NSE and it comprises of about 50 scrips from different sectors. Another interesting difference between NSE and BSE is that NSE shows the fluctuation of share prices of 50 listed companies. On the other hand BSE shows the fluctuation of share prices of 30 listed companies.It is interesting to note that both NSE and BSE are the stock exchanges recognized by Securities and Exchange Board of India or SEBI. In terms of the volume of the business done on a daily basis, both NSE and BSE are equal. It is true that the investor can buy the stocks from both the stock exchanges since many key stocks are traded on both the exchanges.