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NISM Certifications · NISM-Series-VI: Depository Operations · Introduction to the Indian Capital Market

Ms. Iyer holds shares of a listed company bought two years ago through the stock exchange. She now sells them to another investor through the exchange. Which statement best describes this transaction?

This is a secondary market transaction, because already issued shares are being traded between investors on the exchange. The sale proceeds go to the selling investor, Ms. Iyer, and the issuing company receives no funds from the trade.

  1. AIt is a secondary market transaction and the sale proceeds go to Ms. Iyer, not to the companyCorrect
  2. BIt is a primary market transaction because shares are being transferred to a new holder
  3. CIt is a primary market transaction because the company receives the sale proceeds
  4. DIt is a money market transaction because settlement happens within days

Explanation

Trading of already issued securities on an exchange is secondary market activity. The seller receives the proceeds and the issuer gets nothing from it. Settlement time does not make it a money market transaction.

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