In secondary market sale of securities takes place between investors only, then how does this market contribute for capital formation?

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Solution

This market contributes for capital formation indirectly by providing liquidity to the securities bought in primary market.

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In the secondary market, sale of securities takes place between investors only, then how does this market contribute to capital formation?

List-I	List-II
(i) National Stock Exchange	(a) Marks the beginning of the process of dematerialisation of shares of the participating companies.
(ii) National Securities Depository Limited	(b) Facilitation of equal access to investors across the country.
(iii) Securities and Exchange Board of India	(c) To foster the development of an active secondary market for Government Securities.
(iv) Securities Trading Corporation of India	(d) Abolition of Capital issues control and retaining the sale authority for new capital issues

You are working as a financial advisor. One of your clients asked, how securities are sold in secondary market. Give details in this context.

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