Page 120 - DCOM304_INDIAN_FINANCIAL_SYSTEM

Unit 6: Secondary Market

Limit orders are orders to buy or sell at a minimum or maximum price. Notes
Listing agreement is, in a sense, the code of discipline which the stock exchange(s) impose on
a company as a condition precedent to listing its securities.
Listing of securities, on a stock exchange, allows them to be traded there under an agreement
between the exchange and the issuer of the stocks.
Maintenance margin: The required proportion of your equity to the total value of the stock. It
protects the broker if the stock price declines.
Margin call: If the percentage margin falls below the maintenance margin, the broker issues a
margin call requiring the investor to add new cash or securities to the margin account.

Margin trading occur when investors who purchase stocks on margin borrow part of the
purchase price of the stock from their brokers, and leave purchased stocks with the brokerage
firm in street name because the securities are used as collateral for the loan.
Odd-lot Dealer: He/she specializes in buying and selling in amounts which are less than
present trading units.
Percentage margin: The ratio of the net worth, or “equity value” of the account to the market
value of the securities.
Secondary market is a market for already existing long-term securities of governments, semi-
governments and corporate enterprise.
Security Dealer: This dealer specializes in trading in government securities.
Short sale investors can sell shares they do not own.

Stock exchange is the term commonly used for a secondary market, which provide a place
where different types of existing securities such as shares, debentures and bonds.

6.10 Review Questions

1. Define stock exchange and explain its functions.
2. Explain the importance of stock exchanges from the points of view of companies and
investors.
3. Explain the role played by SEBI in protecting investors' interests and controlling the
business at stock exchange.
4. Discuss the Role and objectives of NSCCL.
5. Write a brief note on the key members of the stock exchanges.
6. What do you mean by margin trading? Explain with the help of suitable examples.

7. "Every listing company has certain obligations and is required to comply with the various
clauses of the listing agreement." Discuss.

8. How an efficient secondary market does make access to international capital easier?
9. Write a short note on rolling settlement.

10. As per the listing agreement what are the threshold limit for listing of new companies.

LOVELY PROFESSIONAL UNIVERSITY 115