NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Introduction to the Securities Market
A company issues shares to the public for the first time and the funds raised go directly to the company. Which market segment does this transaction belong to?
This is the primary market. When a company issues securities such as shares in an IPO for the first time, the money raised goes directly to the issuer. In the secondary market, investors trade existing securities among themselves, so the company receives no proceeds.
- ASecondary market
- BPrimary marketCorrect
- CDerivatives market
- DMoney market
Explanation
Fresh issuance of securities by an issuer, such as an IPO, takes place in the primary market and proceeds go to the issuer. Secondary market trades occur between investors and proceeds do not reach the company.
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