Primary Markets and Secondary Markets Flashcards
Primary Markets
Primary Markets are the markets in which corporations and governmental unit raise new capital by making initial offerings of their securities.
In which Market the issuer receives the proceeds
in Primary Market
Secondary Markets
Dealer Markets: OTC Markets it consists of numerous brokers and dealers who are linked by telecommunications equipment that enables them thorough out the country
Secondary Markets provide for trading of previously issued securities among investors.
EXAMPLES
Auction Markets: like NYSE, the American Stock Exchange and regional exchanges conduct trading at particular physical sites. Furthermore , share prices are communicated immediately to the public.
example of listing requirements
for example NYSE has established requirements 1-amount and value of shares outstanding 2-number of shareholders 3-earning power 4-and tangible assets
listing are beneficial for what and didn’t for what?
listing is beneficial because it adds to firms prestige and increase liquidity of a firm’s securities
however increased SEC disclosure requirements and the greater risk of a hostile take over are possible disadvantage
In capital markets, the primary market is concerned with the provision of new funds for capital
investments through
A. New issues of bond and stock securities.
B. Exchanges of existing bond and stock securities.
C. The sale of forward or future commodities contracts.
D. New issues of bond and stock securities and exchanges of existing bond and stock
securities.
Answer (A) is correct.
The primary market is the market for new stocks and bonds. In this market, wherein investment money flows directly to the issuer, securities are initially sold by investment bankers who purchase them from issuers and sell them through an underwriting group. Later transactions occur on securities exchanges or other markets.
If a multinational firm were to raise equity capital on the London Stock Exchange, this would be referred to as a A. Money market transaction. B. Primary market transaction. C. Secondary market transaction. D. Mortgage market transaction.
Answer (B) is correct.
The primary market is one in which a firm raises additional long-term debt or equity capital. It is a market in which newly created securities are bought and sold for the first time
The over-the-counter (OTC) market is
A. An auction market where trading takes place at a particular physical site like the New York
Stock Exchange.
B. A dealer market where brokers and dealers are linked by telecommunications equipment to
trade securities.
C. An auction market that trades the majority of stocks.
D. A dealer market that trades securities on the stock exchanges due to the high dollar volume
of trading.
Answer (B) is correct.
The OTC market is a dealer market, in which brokers and dealers are linked by telecommunications equipment. Securities not traded on the stock exchanges are traded in the OTC market. The dollar volume of trading is much greater on the stock exchanges than the OTC market because the largest companies are usually listed on the stock exchanges.
However, the majority of all stocks are traded in the OTC market
The market for outstanding, listed common stock is called the A. Primary market. B. New issue market. C. Over-the-counter market. D. Secondary market
Answer (D) is correct.
Previously issued (outstanding) stocks of publicly owned companies are
traded among investors in the secondary market. The original issuer
receives no additional capital as a result of such trades.
The Governing authority for the OTC market ?
The National Association of securities dealer (NASD)
its computerized trading system is NASD Automated Quotation NASDAQ System , which supplies price quotes and volume amounts during the trading.
The Majority of stocks are traded in the OTC market, but the dollar valume of trading on the [exchanges] is greater . Why ?
Because [exchanges] list the largest companies
