Secondary Market

Presented to – Jahangir sir

Presented by – Samanpreet
 Secondary market
• The secondary market, also known as the
aftermarket, is a financial market where investors
buy and sell previously issued securities, such as
stocks, bonds, options, and futures contracts.
• It is a market where securities that were
previously sold in the primary market are traded
among investors rather than being sold directly by
the issuing company.
Function of Secondary Market
 Economic Barometer
 Safety of Transactions
 Contributes to Economic Growth
 Liquidity
 Pricing of Securities
 Helpful in Raising new capital
Participants in secondary market

1. Stock Broker
2. Financial Intermediaries
- Commercial Banks
- Insurance Company
- Mutual fund
3. Individual Investors
 Types of orders
 Market order
A market order can be placed by an investor when he/she wants to buy or
sell a security at market prices. Such orders have immediate execution
since the price used is the latest market price. Although the price at which
the order will be executed is not guaranteed, an investor can expect a
guarantee of order execution in this category.
 Limit order

A limit order allows investors to place an order for buying or selling a

stock at the price he/she wants. A buy limit order means that the investor
is willing to buy security only at a specific price or lower and a sell limit
order means he/she wishes to sell the security at a certain price or higher.
Unlike market orders, after placing a limit order, there is no guarantee
that it will get executed.
 Stop order
This type of order for buying or selling a stock is executed only once
the stock price reaches a stated price. Such stock price or value is
called the ‘stop price’. Until the stock price reaches the stated price,
this type of order will remain dormant. Only once the stock price is
achieved, the stop order converts into a market order or limit order
and gets executed.
 A buy stop order

It is entered at a stop price above the current market price. Investors

generally use a buy stop order to limit a loss or protect a profit on a
stock that they have sold short. A sell stop order is entered at a stop
price below the current market price. Investors generally use a sell
stop order to limit a loss or protect a profit on a stock they own.
Margin Trading
In the stock market, margin trading refers to the process whereby
individual investors buy more stocks than they can afford to.
Margin trading also refers to intraday trading in India and various
stock brokers provide this service. Margin trading involves
buying and selling of securities in one single session. Over time,
various brokerages have relaxed the approach on time duration.
The process requires an investor to speculate or guess the stock
movement in a particular session.
Margin(%)= Customer’s equity/ Market value of securities
Short Selling –Price Freeze
 Short selling is an investment or trading strategy
that speculates on the decline in a stock or other
security’s price. It is an advanced strategy that
should only be undertaken by experienced traders
and investors.
 Short selling occurs when an investor borrows a
security and sells it on the open market, planning
to buy it back later for less money.
Thanks