NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Introduction to the Indian Financial Markets
Which of the following is the primary function of the secondary market in securities?
The secondary market's main role is to provide liquidity and price discovery for securities that have already been issued. Investors can buy and sell among themselves on exchanges. Raising fresh capital through IPOs, rights issues or anchor allotments happens in the primary market, not here.
- AProviding liquidity and price discovery for securities already issuedCorrect
- BRaising fresh capital for issuers through IPOs
- CIssuing new shares to existing shareholders through rights issues
- DAllotting securities to anchor investors before a public issue
Explanation
The secondary market is where existing securities are traded among investors, giving liquidity and continuous price discovery. IPOs, rights issues and anchor allotments are primary market activities where the issuer raises new funds.
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