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

Ravi buys shares of a listed company through his broker on the NSE cash segment. In the securities market structure, the trade he executed is classified as a transaction in which market?

The trade is in the secondary market, because the listed shares were already issued and are being bought from another investor through the exchange. The primary market covers only fresh issuance by the company, regardless of whether the buyer is a first-time investor.

  1. APrimary market, because shares are being bought for the first time by him
  2. BSecondary market, because existing listed securities are traded among investorsCorrect
  3. CMoney market, because the settlement is within a short period
  4. DPrivate placement market, because the buyer is an individual

Explanation

The secondary market is where previously issued securities are traded among investors on exchanges. Primary market involves fresh issue by the company to investors. Purchase by an investor for the first time does not make it primary; the shares already exist and are being transferred between investors.

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