NISM-Series-VII: Securities Operations and Risk Management · Introduction to Securities Broking Operations

Securities Market Structure and Participants in India for NISM

Updated 11 October 2026 · Fact-checked

The Indian securities market is where securities are issued (primary market) and traded (secondary market), under SEBI's regulation. Participants include issuers, investors, intermediaries such as stock brokers and depository participants, and market infrastructure institutions: stock exchanges, clearing corporations and depositories. Answer by identifying the entity's role.

Understand Securities Market Structure and Participants

A securities market lets those who need money (issuers) meet those who have savings (investors). Issuers include companies and governments. Investors include individuals, mutual funds, banks, insurers and foreign portfolio investors. The securities traded include shares, debentures, bonds, government securities, units of mutual funds and derivatives.

The market has two main parts. The primary market is where securities are issued for the first time, for example through an IPO, FPO, rights issue or private placement. Money goes to the issuer. The secondary market is where already issued securities are bought and sold between investors, usually on a stock exchange. Money goes to the selling investor, not to the issuer. The secondary market gives liquidity and price discovery, which in turn makes the primary market work.

By product, the market is often split into the equity market, the debt market (government and corporate bonds) and the derivatives market (futures and options). Exchanges run these as segments, such as the cash (equity) segment, the equity derivatives segment and the debt segment.

Intermediaries help investors reach the market. A stock broker (trading member) places orders on the exchange for clients. A depository participant (DP) is the agent of a depository and opens demat accounts. Others include merchant bankers, registrars and transfer agents, custodians, clearing members, investment advisers and research analysts.

Market infrastructure institutions (MIIs) are the core systems of the market. They are stock exchanges, clearing corporations and depositories. The exchange provides the trading platform, the clearing corporation guarantees and settles trades, and the depository holds securities in electronic form and transfers them. SEBI regulates the market and its participants.

Key formulas to remember

Primary vs secondary market: Primary: issuer → investor (new issue). Secondary: investor ↔ investor (existing securities); Proceeds reach the issuer only in the primary market.
Market infrastructure institutions (MIIs): MIIs = Stock exchanges + Clearing corporations + Depositories; Brokers and DPs are intermediaries, not MIIs.
Role mapping: Exchange = trading; Clearing corporation = clearing, settlement and guarantee; Depository = holding and transfer of securities in demat form; Use this to eliminate wrong options quickly.
Participant mapping: Broker → exchange; DP → depository; Clearing member → clearing corporation; Each intermediary connects the investor to one infrastructure institution.

How to solve Securities Market Structure and Participants questions

Most questions on this topic ask you to match an entity to its role or classify it. Use this routine.

1Read the question and mark the keyword: issue, trade, clear, settle, hold, regulate or advise.
2Decide whether the question is about the primary market (new issue) or the secondary market (trading).
3Identify whether the entity is an issuer, investor, intermediary or market infrastructure institution.
4Map the function to the institution: trading to exchange, clearing and settlement to clearing corporation, holding and transfer to depository.
5Check each option for a swapped role, such as a depository doing clearing.
6Watch for words like 'not', 'except' and 'only', and pick the answer that fits the exact wording.

Quickest way: Three-pillar shortcut

When to use it: Use it when a question asks who does what among exchange, clearing corporation and depository, or which is an MII.

Think of three words: Trade, Clear, Hold.
Trade means exchange. Clear and settle means clearing corporation. Hold and transfer means depository.
If the option names a broker or DP as an MII, reject it.
If proceeds go to the company, it is primary. If between investors, it is secondary.

Common mistakes in Securities Market Structure and Participants

Treating stock brokers or depository participants as market infrastructure institutions.
They deal with the exchange and depository daily, so they seem part of the infrastructure.
Fix: Remember that MIIs are only exchanges, clearing corporations and depositories. Brokers and DPs are intermediaries.
Saying the issuer receives money when shares are bought on the exchange.
Students forget that secondary market trades are between investors.
Fix: Ask who sold. If an investor sold, the money goes to that investor.
Assigning settlement to the depository.
Both are involved in settlement, so roles blur.
Fix: The clearing corporation determines obligations and settles; the depository moves the securities.
Calling an IPO a secondary market transaction because it ends in exchange listing.
Listing and trading follow the IPO.
Fix: The first issue is primary. Trading after listing is secondary.
Confusing the regulator with the exchange.
Both set rules that participants follow.
Fix: SEBI is the statutory regulator. Exchanges are market institutions that run trading under SEBI's oversight.

Worked examples

Example 1

Which of the following is NOT a market infrastructure institution? (a) Stock exchange (b) Clearing corporation (c) Depository (d) Stock broker

Show the solution

Recall that MIIs are stock exchanges, clearing corporations and depositories.
Options (a), (b) and (c) are all in this list.
A stock broker is an intermediary that places client orders on the exchange.
So the stock broker is the odd one out.

Answer: (d) Stock broker

Example 2

A company issues new shares to the public through an IPO, and later an investor sells those shares to another investor on the exchange. Identify the market in each case and who receives the money.

Show the solution

The IPO is the first issue of shares by the company, so it is the primary market.
In an IPO the money paid by investors goes to the company.
The later sale between two investors on the exchange is the secondary market.
In that sale the money goes to the selling investor, not the company.

Answer: IPO: primary market, money to the company. Later sale: secondary market, money to the selling investor.

Exam tips

Learn the one-line role of each MII and each intermediary; many questions are direct matching.
Look for 'except' and 'not' in the question stem; these are common trap formats.
Negative marking applies in this exam, so eliminate swapped-role options before guessing.
Keep a clear line between regulator (SEBI), MIIs and intermediaries when you revise.

Practice questions from Introduction to Securities Broking Operations

Securities Market Structure and Participants in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Securities Market Structure and Participants: frequently asked questions

What is the difference between primary and secondary market?

In the primary market, securities are issued for the first time and the issuer receives the money. In the secondary market, existing securities are traded between investors. The issuer gets no proceeds from secondary trades.

Which are the market infrastructure institutions in India?

They are stock exchanges, clearing corporations and depositories. They provide trading, clearing and settlement, and holding of securities in electronic form.

Is a stock broker a market infrastructure institution?

No. A stock broker is an intermediary that trades on the exchange for clients. It is a member of the exchange, but it is not an MII.

Who regulates the securities market in India?

SEBI, the Securities and Exchange Board of India, regulates the securities market and its participants. Exchanges and other institutions operate under its oversight.