NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Introduction to Securities Markets
In the Indian securities market, which of the following best describes the primary function of the secondary market?
The secondary market provides liquidity and price discovery for securities that have already been issued. Investors can buy and sell existing securities there. Raising fresh capital from investors is the job of the primary market, not the secondary market.
- AProviding liquidity and price discovery for securities already issuedCorrect
- BRaising fresh capital for companies through new issues
- CRegulating the conduct of stock brokers
- DIssuing demat account numbers to investors
Explanation
The secondary market is where existing securities are traded among investors. This gives holders an exit route (liquidity) and continuous price discovery. Raising fresh capital happens in the primary market, so that option is wrong.
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