Class -10 Fmm Notes | Financial markets management class 10, Chapter - 4 | Secondary Market (Part -1)

 Secondary market?

A market where securities are traded after being initially offered to public in the Primary market and listed on the stock exchange.

Role of secondary market?

Provides an efficient platform for trading in securities.

Facilitates value enhancing control activities for management of company.

Enabling implementation of incentive based management contracts.

Difference between primary and secondary market?

The primary market provides the channel for sale of new securities while secondary market deals in securities previously issued.

Role of stock exchange in buying and selling shares?

Stock exchange is a regulatory authority(Securities and exchange Board of India ) in India. It provides a platform where buyers and sellers can meet to transact in securities.

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Demutualisation of stock exchanges?

It means dividing the legal structure of an exchange in different sets having ownership, management and trading rights with different groups of people. Earlier these three were the responsibilities of only one trading member.

How is demutualised exchange different from a mutual exchange?

in a mutual exchange three functions of ownership management and trading concentrated into a single group. Where as in demutuslised stock exchange these three things are divided.

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What is screen based trading?

National Stock Exchange has introduced a nationwide online fully automated screen based trading system where a member can punch into the computer the quantities of a security and the price at which he would like to transact, and the transaction is executed as soon as a metric sale or by order from counterparty is found.

NEAT - National Exchange for Automated Trading.

It is a state-of-the-art client server based application.

It has uptime record of 99.7%

 For all trades, uniform response time of less than 1 second.

How to place orders with the broker?

You may go to the broker's office or place /  phone / through Internet.

How does an investor get access to internet based trading facility?

investors need to get in touch with an NSE broker providing the service to avail of internet based trading facility.

Contract note.

Confirmation of trades done on a particular day on behalf of client by a trading member.

imposes a legally enforceable relationship between the client and the trading member.

What details are required to be mentioned on contract note issued by the stock broker?

Name address and SEBI registration number of member broker.

Name of partner

Dealing office address

Client name

Trade number and time

Order number and order time

Quantity and kind of securities

Service tax rates

Brokerage

What is the maximum brokerage that a broker can charge?

It should not be more than 2.5 % of the value mentioned in the respective purchase or sale note.

Why should one trade on a recognised stock exchange only for buying selling shares?

Can have best prices.

Lack of any counterparty risk.

Access to investor grievance and redressal mechanism of stock exchange.

Protection up to a prescribed limit from the investor protection fund.

How to know if the broker or sub broker is registered?

Broker's registration number begins with letter 'INB'and that of a sub broker with the letter 'INS'.

What precautions one must take before investing in stock markets?

Make sure your broker is registered with SEBI.

Receive contract note for all your transactions  your broker.

Investors should always know the risk.

Do not be misled by market rumours.

Know the future prospects quality of Management past track.

Spend some time checking out about the company before investing.

Do not be attracted by announcement of fantastic results.

Do your own research before investing in any stock.

Investing in very low priced stock does not guarantee high returns.

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