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Introduction to Securities and Securities Market

Securities are financial instruments issued to raise funds. The primary function of the securities

market is to enable the flow of capital from those that have it to those that need it. Securities

market helps in transfer of resources from those with idle or surplus resources to others who

have a productive need for them. To state formally, securities market provides channels for

conversion of savings into investments.

A security represents the terms of exchange of money between two parties. Securities are issued

by companies, financial institutions or the government. They are purchased by investors who

have money to invest. Security ownership allows investors to convert their savings into financial

assets which provide a return. Security issuance allows borrowers to raise money at a cost.

Through Securities Market, a broader universe of savers with surplus to invest is available to the

issuers of securities and a universe of wider options is available to savers to invest their money

in. Thus, the objectives of the issuers and the investors are complementary, and the securities

market provides a platform to mutually satisfy their goals. Securities are useful because owners

can transfer their interest to others without the issuers being impacted – by providing liquidity,

securities allow issuers to raise capital for the long term without locking in investors.

Broadly stating, Financial Market consists of:

· Investors (buyers of securities)

· Borrowers/Seekers of funds (sellers of securities)

· Intermediaries (providing the infrastructure to facilitate transfer of funds and securities)

· Regulatory bodies (responsible for orderly development of the market).

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