NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Introduction to the Securities Market
Which of the following best describes the primary function of the secondary market in securities?
The secondary market provides liquidity and price discovery for securities that have already been issued. Investors can buy and sell listed securities on exchanges, whereas raising fresh capital, underwriting and anchor allotments belong to the primary market.
- ARaising fresh capital for issuers through new share issuance
- BProviding liquidity and price discovery for securities already issuedCorrect
- CUnderwriting initial public offerings for merchant bankers
- DAllotting shares to anchor investors before listing
Explanation
The secondary market is where existing securities are traded among investors, giving them liquidity and continuous price discovery. Raising new capital, underwriting and anchor allotment all relate to the primary market, so those options are wrong.
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