NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Introduction to Securities Markets
In the Indian securities market, which of the following is the primary function of the primary market?
The primary market exists to let issuers raise fresh capital by issuing new securities, for example through an IPO. Money flows from investors to the issuer. Trading of already issued securities between investors takes place in the secondary market, not the primary market.
- ATrading of existing listed shares between investors
- BRaising fresh capital by issuers through new issuance of securitiesCorrect
- CSettlement of derivative contracts on expiry
- DProviding a platform for margin trading of listed shares
Explanation
The primary market is where securities are issued for the first time, such as through an IPO or FPO, so the issuer receives the funds. Trading of existing securities between investors happens in the secondary market, which is why the first option is wrong.
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