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NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Introduction to the Securities Market

In the Indian securities market, which of the following best describes the role of the secondary market?

The secondary market is the platform where securities that have already been issued are traded among investors. It provides liquidity and continuous price discovery. Fresh capital raising happens in the primary market, not the secondary market.

  1. AIt provides a platform for trading of securities already issued, giving investors liquidityCorrect
  2. BIt is the market where companies raise fresh capital directly from investors through new issues
  3. CIt is the market where only government securities are issued by the RBI
  4. DIt is the market where only unlisted securities are traded privately

Explanation

The secondary market is where previously issued securities are bought and sold among investors, typically on stock exchanges. This gives liquidity and price discovery. Raising fresh capital is the function of the primary market, so the second option is wrong.

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