Sunday, April 21, 2013

Finance: Security Market

Security Market

A Security Market is a mechanism bringing together buyers and sellers of financial assets to facilitate trading. Nepal Stock Exchange (NEPSE), American Stock Exchange (AMEX), Over-the-counter (OTC) etc. are the examples of security markets.

Types of Security Market

A. On the basis of economic function

  1. Primary Market
    Market for issue of new or fresh security in order to raise capital by the issuer.
  2. Secondary Market
    It is the market for already issued or subscribed or listed security. Eg. Transfer the shares between an investor to another investor.

B. On the basis of maturity of security

  1. Money Market
    Securities having maturity period up to 1 year.
    Eg. Treasury bills
  2. Capital Market
    Securities having maturity more than 1 year.

OTC Market

A security which is not traded on an exchange, usually due to an inability to meet listing requirements.


Third Market

The third market refers to the trading of any securities that are listed on organized stock exchange in over the counter market.


Fourth Market

The fourth market refers to those institutional investors and wealthy investors who buy and sell securities directly from each other bypassing the normal dealer services. The fourth market organizer may collect a certain small amount of commission or a flat annual fee for helping to arrange these large transactions.


Methods of Market Index Computation

  1. Price weighted index
  2. Value weighted index
  3. Equally weighted index
  4. Geometric mean index

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