NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Introduction to the Securities Market
Ananya buys shares of a listed company through the secondary market on the NSE. Which statement best describes the company's position in this transaction?
The company receives no money because secondary market trades only transfer existing shares from one investor to another. The sale proceeds go to the seller, not the issuer. Fresh shares and funds for the company arise only in the primary market.
- AThe company receives the sale proceeds directly because it issued the shares
- BThe company receives no money from the transaction, as the shares are transferred between investorsCorrect
- CThe company must issue fresh shares to Ananya
- DThe company must approve each trade before settlement
Explanation
In the secondary market, existing securities change hands between investors. The issuer does not receive funds, which go to the selling investor. Fresh issuance happens only in the primary market, and the company does not approve individual exchange trades.
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