SECONDARY MARKET/STOCK EXCHANGE MARKET, ALL PROCEDURE:—

MEANING OF SECONDARY MARKET:– The secondary market is the market for the sale and purchase of previously issued or second hand securities.

MEANING OF STOCK EXCHANGE:-

Stock exchange can be defined as."An organisation or body of individuals, whether incorporated or not established for the purpose of assisting, regulating and controlling of business in buying, selling and dealing in securities".

FUNCTIONS OF STOCK EXCHANGE/SECONDARY MARKET:–

1- Economic Barometer: A stock exchange is a reliable barometer to measure the economic condition of a country. The rise or fall in the share prices indicates the boom or recession cycle of the economy.

2- Pricing of securities: The stock market helps to value the securities on the basis of demand and supply factors. The investors can know the value of their investment, the creditors can value the creditworthiness and government can impose taxes on value of securities.

3- Safety of transactions: In stock market only the listed securities are traded and stock exchange authorities include the companies names in the trade list only after verifying the soundness of company. This ensures safety of dealing through stock exchange.

4- Contributes to economic growth: In stock exchange securities of various companies are bought and sold. This process of disinvestment and reinvestment leads to capital formation and economic growth.

5- Promotes the habits of savings and investment: The stock market offers attractive opportunities of investment in various securities. This attractive opportunities encourage people to save more and invest in securities of corporate sector rather than investing in unproductive assets such as gold, silver, etc.

TRADING PROCEDURE ON A STOCK EXCHANGE:- 

 Previously the buying and selling of securities was done in trading floor of stock exchange; today it is executed through computer and it involves the following steps:

1- Selection of broker: The buying and selling of securities can only be done through SEBI registered brokers who are members of the stock exchange. 

So, the first step is to select a broker who will buy/sell securities on behalf of the investors or speculator.

2- Opening demat account with depository: Demat account refer to an account which an Indian citizen must open with depository participant (banks or stock brokers) to trade in listed securities in electronic form.

3- Placing the order: After opening the demat account, the investor can place the order. The order can be placed to the broker either personally or through phone, email, etc.

4- Match the shares and it's prices: The fourth step is to match the shares and it's prices according to investor's order. Investor must clearly specifying the range of price at which securities can be bought or sold. 

e.g., "Buy 200 equity shares of Reliance for not more than rs. 400 per share."

5- Executing the order: As per instructions of the investors, the broker executes the order i.e. he buys or sells the securities. Broker prepares a contract note for the order executed. The contract note contains the name and the price of securities, name of parties and brokerage (commission) charged by him. Contract note is signed by the broker.

5- Settlement: This means actual transfer of securities. This is the last stage in the trading of securities done by the broker on behalf of their clients. 

click to know what is the meaning and need of Dematerialisation.