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Unit 2: Securities Market: An Overview

Traders require markets that are liquid, with minimal transaction and delay costs, in Notes
addition to transparency and assured completion of the transaction.

Based on these core requirements, a handful of securities market structures have become
the dominant trade execution structures in the world.
The government securities market has witnessed significant transformation in the 1990s.

With giving up of the responsibility of allocating resources from securities market,
government stopped expropriating seigniorage and started borrowing at near-market
rates.

Government securities are now sold at market related coupon rates through a system of
auctions instead of earlier practice of issue of securities at very low rates just to reduce the
cost of borrowing of the government.
Major reforms initiated in the primary market for government securities include auction
system (uniform price and multiple price method) for primary issuance of T-bills and
central government dated securities.
As a result of the gradual reform process undertaken over the years, the Indian G-Sec
market has become increasingly broad-based and characterized by an efficient auction
process.

2.5 Keywords

Primary Market: The primary market refers to the market that provides the channel for sale of
new securities
Pure Forward: Pure forward is out side the formal market.
Secondary Market: Secondary market refers to a market where securities are traded after being
initially offered to the public in the primary market and/or listed on the Stock Exchange.
Short Selling: Short selling is defined as selling a stock which the seller does not own at the time
of trade.
Variant of Secondary Market: A variant of secondary market is the forward market, where
securities are traded for future delivery and payment. Pure forward is out side the formal
market.

2.6 Review Questions

1. What is cross margining?

2. Explain T+1 concept.
3. Who is Indian stock market regulator?
4. Discuss market infrastructure in Indian stock market.
5. “Positions in option contracts shall not be considered for cross margining benefit”. Why?
6. “The securities markets in India have witnessed several policy initiatives”. Discuss.

7. What are the various reforms have been witnessed by the debt markets in India?
8. What is short selling concept?
9. How does investors are protected?

10. Write explanatory note on NSCCL.

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