TYPES OF EQUITY MARKET:
A. PRIMARY MAKET:
The primary market is also known as new issues market. Here, the transaction is conducted between the issuer & buyer. The primary market is the part of the capital market that deals with issuing of new securities. Primary market creat long term instruments through which corporate entities raise funds from the capital market. In short, the primary market creates new securities & offers them to the public. It is a public issue, if anybody & everybody can subscribe, for it. If the issue is made to select group of people then it is termed as private placement.
Capital & Equity can be raised in the primary market by any of the following four ways:
1. Public Issue
As the name suggests, public issue means selling securities to the public at large, such as IPO. It is the most vital method to sell financial securities.
2. Rights Issue
Whenever a company needs to raise supplementary equity capital, the shares have to be offered to present shareholders on a pro-rata basis, which is known as the Rights Issue.
3. Private Placement
This is about selling securities to a restricted number of classy investors like frequent investors, venture capital funds, mutual funds, and banks comes under Private Placement.
4. Preferential Allotment
When a listed company issues equity shares to a selected number of investors at a price that may or may not be pertaining to the market price is known as Preferential Allotment.
B. SECONDARY MARKET:
The secondary market also called the after market & follow on public offering is the financial market in which previously issued financial instruments such as bonds, stock options, & futures are bought & sold.
THE SECONDARY MARKET IS FURTHER DIVIDED INTO 2 KINDS OF MARKET:
1. AUCTION MARKET
An auction market is a place where buyers & sellers convene at a place & announce the rate at which they are willing to sell or buy securities. They offer either the ‘BID’ or ‘ ASK’ prices, publicly. Everything is announced publicly & interested investors can make their choice easily. Where trading & settlement is done through the stock exchange & the buyers & sellers don’t know each other.
2. OTC
OVER THE COUNTER/ OFF EXCHANGE TRADING is done directly between two parties, without the supervision of on exchange. Is based in Mumbai, Maharashtra.It does not take place, however, on the stock exchanges.OTC MARKETS are the informal types of market where trades are negotiated.
DIFFERENCE BETWEEN PRIMARY MARKET & SECONDARY MARKET
Also Read | Option Market
