2. Importance of Financial
Markets
Facilitate in raising funds
Intermediary between savers and
borrowers
Absolutely vital for the proper
functioning of capitalistic economies.
3. The Primary Market
The market for new issues of securities,
typically involving investment bankers.
Initial Public Offering (IPO)
Common stock of a company being sold for
the first time
Investment Banker
Firm specializing in the sale of new
securities to public, typically be
underwriting the issue.
4. The Primary Market (Cont’d)
Underwriting
The process by which investment bankers
purchase an issue of securities from a firm
and resell it to the public.
Prospectus
It provides information about an initial
public offering of securities to potential
buyers.
Private Placements
5. A Primary Offering of Securities
Issuer
Originating investment banker
Underwriting Syndicate (group) of investment bankers
Selling group composed of underwriting syndicate
plus any selected retail brokerage houses
Investors
6. The Secondary Markets
Where existing securities are traded
among investors
Broker
An intermediary who represents buyers
and sellers in securities transactions and
receives a commission
Bid Quote
The price at which a dealer offers to buy
7. The Secondary Markets
(Cont’d)
Ask Quote
The price at which a dealer offers to buy
shares
Bid price Rs.245.80
Ask price Rs.245.85
Blocks
Transactions involving at least 10,000
shares