Most of you must have invested in different shares to make quick money. The secondary market, those who don’t know, is a place where investors can easily buy and sell securities from other investors. Some of the famous secondary market examples are the National Stock Exchange (NSE), NASDAQ, New York Stock Exchange (NYSE) and London Stock Exchange (LSE). It is present as a market where securities are traded. Investors have the option to trade the securities without any involvement of issuing companies according to SEBI.
The investors who sell the securities get the income from the amount received for security in the secondary market.
Significance of the secondary market
The objectives of secondary market must be very clear, and there are lots of reasons behind its importance.
- It is useful for measuring the economic condition. Any kind of rise or fall in share prices signifies a boom in an economy.
- It is required for measuring the economic condition.
- It provides a powerful mechanism meant for the valuation of a company.
- The market is needed to drive securities’ prices for creating a genuine and fair market value market based on supply and demand.
- It is known for promoting economic efficiency. Every sale includes both sellers who understand the importance of security less than a price and buyer who stand security more than price.
- The stocks can be bought and sold for cash because the secondary market gives high liquidity access.
The working of the secondary market
The participants can clasp the securities in the secondary market. This is done to acclimatize the holdings as per the changes in their estimation of returns and risks. According to the features of the secondary market, it generally operates via two channels. It acts as an over-the-counter market, or you can say Exchange-Traded market. With this market, it is possible to enter the transactions at any time, and it is possible to do active trading. Being an appropriate platform, it is excellent for liquidating the holdings. The holding securities can be quickly sold in different stock exchanges.
The secondary market generally facilitates stock trading and further converting the securities into cash. Note that, with continuous trading in this market, it is possible to upsurge the liquidity of traded assets. Thus, one should take advantage of this legitimate platform to make a profit from the investments.