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SECONDARY MARKET

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The securities market in India can be divided into two segments –Primary MarketSecondary Market

Structure of Securities Market

Secondary Market refers to a market where securities are traded after being initially offered to the public in the primary market and/or listed on the Stock Exchange.

Majority of the trading is done in the secondary market. Secondary market comprises of equity markets and the debt markets.

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In primary markets, securities are bought by way of public issue directly from the company.

New issue are available in primary market.

The primary is a middlemen.

New issue of common stock;bonds and preferred stock are sold by companies.

In Secondary market share are traded between two investors.

Securities usually bought and sold through the secondary market.

The secondary market are broker and dealer.

The secondary market stock and bonds issues are sold to the public.

primary market secondary market

Secondary Market has an important role to play behind the developments of an efficient capital market.

Secondary market connects investors' favoritism for liquidity with the capital users' wish of using their capital for a longer period.

Secondary market is that financial market in which investor can buy and sell shares and bonds after its issue by company. 5

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Government securities

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Participants in the Secondary Market Stock Exchange Clearing Corporation Depositories/ DP Trading Member (Stock Broker)/

Clearing Member Registrar to an Issue and Share

Transfer Agent

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Getting started To start trading the following are

required – Trading account

• Member – Client Agreement• Risk Disclosure Document

Demat account Bank account Permanent Account Number (PAN) Unique Client Code

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Where to trade

The secondary market is divided into two segments – Cash/ Equity segmentDerivative segment –

• Equity Futures and Option (F & O) – Index / Single Stock

• Currency Futures/ Option• Interest Rate Futures

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How to trade Trade through a SEBI registered

Stock Broker, by -Placing margins as required with

the brokerplacing order over the phoneemail etc.

Internet Trading Wireless / Mobile Trading.

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Post Trade The stock broker is required to provide

contract notes confirming the trades done within 24 hrs of executing the trade

The contract notes can either be in

physical or electronic form

Step 1.     Investor / trader decides to trade

Step 2.     Places order with a broker to buy / sell the required quantity of respective securities

Step 3.     Best priced order matches based on price-time priority

Step 4.     Order execution is electronically communicated to the broker’s terminal 12

Step 5.     Trade confirmation slip issued to the investor / trader by the broker  

Step 6.     Within 24 hours of trade execution, contract note is issued to the investor / trader by the broker

Step 7.      Pay-in of funds and securities before T+2 day

Step 8.     Pay-out of funds and securities on T+2 day           13

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Settlement The settlement in the securities

market is done on a T+2 Rolling Settlement Cycle (where T = Trading Day).

Trading (T)

Option of Early Pay-in

(T1)

Auction (T3)

Close out (T4)

Pay-in and Pay out

(T2)

TRADE SETTLEMENTT + 2

FAILURE TO

PAY-IN

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Settlement - Auction

Incase there is a shortage in Pay-in of shares at the time of settlement on T+2, the Stock Exchange purchases the requisite quantity in the Auction Market and gives them to the buying trading member.

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Settlement - Close Out If the shares could not be bought in the

auction i.e. if shares are not offered for sale in the auction, the transactions are closed out as per SEBI guidelines

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Charges by the Stock Broker Brokerage charged by member broker

(maximum 2.5%) Service tax as stipulated Securities Transaction Tax Penalties arising on specific default on

behalf of client (investor)

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Investor Protection Mechanism Investor Protection Fund or

Consumer Protection Fund (IPF/ CPF) is set up by the Stock Exchanges to meet the legitimate investment claims of the clients of the defaulting members that are not of speculative nature

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Investor Grievance Redressal Complaints can be filed with OIAE

department of SEBI against companies for delay or non-receipt of shares, refund orders, etc., and with Stock Exchanges against brokers on certain trade disputes or non receipt of payment/securities.

Arbitration

Court of Law

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