Banking. Characteristics of the secondary securities market (lecture notes)

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Banking. Characteristics of the secondary securities market (lecture notes)

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Characteristics of the secondary securities market

The secondary securities market is a stock exchange where they sell their securities, mainly shares, on the one hand, corporations and financial institutions in need of additional funds, and on the other hand, individuals, various organizations seeking to profitably invest personal money. Corporations, selling shares on the stock exchange, sell investors (buyers) a share of their property.

At the same time, the peculiarity of the exchange as a securities market is that it is mainly used to sell and buy shares of old issues, i.e., there is a transfer of existing shares from one owner to another. These types of transactions usually do not lead to the formation of new capital, but they create the so-called liquid funds, allowing you to increase the amount of cash. Without the availability of liquidity (the ability to sell shares at any time), investors would not buy new issues of shares.

Operations for the sale of shares are carried out on the exchange, that is, in certain markets or places. At the same time, central and regional exchanges are distinguished.

The purchase of shares by an investor is not only a share of ownership in some enterprise, but the responsibility and certain financial risk of the entrepreneur. The buyer of the shares will be rewarded in the form of additional income if the corporation or company makes a profit. Otherwise, the shareholder will be left without a dividend. He may also lose his contribution if the company goes bankrupt.

Investors are attracted to stocks because their value can grow much faster than deposits in banks or government securities. In the conditions of an economic boom, inflationary processes, the price of a share grows especially quickly. At the same time, the profit from such growth is purely theoretical and can only be realized through the sale of shares.

In general, the exchange accepts a significantly larger number of depositors indirectly, mainly through the pension funds of enterprises, which partially invest in securities through the exchange.

Author: Shevchuk D.A.

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