Briefly discuss the working of secondary share markets.

Briefly discuss the working of secondary share markets. 

Ans. (a) Secondary markets are markets where equities that have already been issued are sold to new buyers by the original buyers of the shares. It consists of recognized stock exchanges which operate under rules and bye-laws duly approved by the government and authority body (SEBI). 

(b) Some specific securities are allowed to be traded on a particular stock exchange. These are called listed securities. 

(c) Only members can participate in trading. Investors are not allowed to trade directly. They need to place their orders with the members who are called brokers of the exchange. 

(d) There are two systems of trading in stock exchanges: open outcry system and screen based system. 

(e) In open out cry system, traders shout and use signals on the floor of the exchange, which has got many notional trading posts for different securities. Buyers make their bids and sellers their offers and deals are struck at a price where both agree. 

(f) In the screen based system, the computer screen replaces the trading ring, and bidders are placed at a distance and bidding through networking. Through this, a large number of geographically separated participants can directly trade with each other.