BBS/BBA/MBS Exam Notes

What is Stock Market or Security Market? Types of Stock Market?

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Stock Market

Securities market is a component of the financial market where securities can be bought and sold between buyers and sellers to the subjects of the economy, on the basis of demand and supply. It is the place where stock are listed and traded. A security is a tradable financial asset. There are two main types of security market, there are as follows:

  • Primary market and secondary market
  • Money market and capital market
  1. Primary market

The primary market is where securities are created for first time. In other word primary market as the market where an initial public offering (IPO) takes place and for the first time securities are offered to general public.

  • Secondary market

Secondary market is the place where already issued share are traded between sellers and buyers. It follow after the initial public offering which previously issued financial instruments such as stock, bonds are bought and sold.

  • Money market

The money market is a place where financial instruments with highly liquid and very short maturities are traded. It is also called short term financial market which is mainly associated for business and corporate firm for short term working capital need fulfillment. The money market instruments are treasury bills, commercial paper, bankers’ acceptances, certificates of deposit, bills of exchange, repurchase agreements, federal funds etc.

  • Capital market

The market where long-term funds are borrowed and lent is known as a capital market, the primary purpose being directing the flow of saving into long-term investments (mostly for a period of one year and above).

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