Definition of Securities

• Securities refers to an instrument representing ownership (Stocks),

• Debt agreement(Bonds),
• Or the right to ownership (Derivatives).

A security is essentially a contract that can be assigned a value and traded.

Thus the four important elements of securities markets are:

• Investors - The Surplus generating units (Savers) are investors

• Issuers - Deficit generating units (spenders) are issuers.

• These investors and issuers of financial securities constitute two important elements of the securities markets.

• Intermediaries - The third critical element of markets is the intermediaries who act as conduits between the
investors and issuers

• Regulators - Regulatory bodies, which regulate the functioning of the securities markets, constitute the last but
very significant element of securities markets.

Securities Can be

• Government or Industrial
• Long-term or short-term
• Primary Market or Secondary Market .

Participants in Securities Market

• Issuer of securities
• Investors in securities
• Intermediaries like Merchant Banker, Broker etc.

For General Investors : Provides efficient platform for trading investors

For company :Serves as a monitoring and control conduit. Facilitate value enhancing control activities, enabling
implementation of incentive-based management contracts and aggregating information (Via price discovery) that
guide management decisions.

A place where buyer and seller of securities can enter into transaction to purchase and sell shares ,bonds
,Debentures etc.

Enable corporate ,entrepreneur to raise resources for their companies and business ventures through Public issues
(IPO)

Transfer resources from those having Idle resources (Investors) to those who have need for them (Corporate).

Provides channels for reallocation of savings to investment and entrepreneurship.

Savings are linked to investments by varieties of intermediaries through securities.

Price Discovery
Financial markets provide a centralized place for trading in financial products. This `place’ need not be physical.
It may be virtual such as the online trading system of the National Stock Exchange. This feature enables the
prospective buyers and sellers to discover the going price and take appropriate decisions.

Liquidity
Financial markets also provide a mechanism for the investors to sell their financial assets. For example, if an
investor wishes to sell his shares, the equity markets offer an easy exit.

Lower Transaction Costs

Financial markets save a market player the cost of locating counterparty to his transactions. The counterparty can
be readily found by going to the appropriate market.

Borrowing and Lending: Financial markets permit the transfer of funds (purchasing power) from one agent to
another for either investment or consumption purposes.

Price Determination: Financial markets provide vehicles by which prices are set both for newly issued financial
assets and for the existing stock of financial assets.

Information Aggregation and Coordination: Financial markets act as collectors and aggregators of information
about financial asset values and the flow of funds from lenders to borrowers.

Risk Sharing: Financial markets allow a transfer of risk from those who undertake investments to those who
provide funds for those investments.

Liquidity: Financial markets provide the holders of financial assets with a chance to resell or liquidate these
assets.

Efficiency: Financial markets reduce transaction costs and information costs.

To promote the savings and for them to be canalized towards of carrying through investment projects that
otherwise wouldn’t be possible you need that the issuing institution of the securities to be admitted for quoting.
The negotiations will be done on the primary market