NISM Certifications · NISM-Series-XV: Research Analyst · Introduction to Securities Market
Which statement about the secondary market's role in the Indian securities market is most accurate?
The secondary market provides liquidity and price discovery for securities that have already been issued, as investors trade among themselves on exchanges. Companies receive proceeds from the primary market, not from secondary trades, and the secondary market is not limited to government securities.
- AIt provides liquidity to investors and enables price discovery for securities already issuedCorrect
- BIt is where companies receive proceeds directly from the first sale of new shares
- CIt is restricted to trading of government securities only
- DIt is the market where only unlisted shares are issued to promoters
Explanation
The secondary market is where existing securities are traded among investors. This gives liquidity and continuous price discovery. Proceeds from first sales of new securities go to the issuer in the primary market, so the other statements are incorrect.
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