16.6 Securities Markets

Securities markets are crucial for businesses to raise capital. They allow companies to issue stocks and bonds, giving investors ownership or debt claims. Through initial public offerings and secondary trading, these markets provide companies with funds and investors with opportunities.

Primary markets involve new securities sold directly by companies, while secondary markets facilitate trading between investors. Investment bankers help companies issue securities, while stockbrokers execute trades for clients. These players keep the markets running smoothly.

Securities Markets

Securities Markets and Capital Raising

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Top images from around the web for Securities Markets and Capital Raising

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  Buying and Selling at Securities Exchanges | OpenStax Intro to Business View original

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• Securities markets enable businesses to raise capital by issuing financial instruments such as stocks representing ownership in a company and bonds which are debt obligations that companies issue to borrow money from investors
• Companies can raise capital through initial public offerings (IPOs) in the primary market where shares of stock are sold to the public for the first time with proceeds from the sale of shares going directly to the issuing company
• Publicly traded securities in the secondary market provide liquidity for investors allowing them to easily buy and sell securities which makes securities more attractive to investors and facilitates capital raising for businesses

Primary vs Secondary Markets

• Primary securities market is where new securities are issued and sold directly by the issuing company to raise capital with proceeds from the sale of securities going to the issuing company (IPOs, private placements)
• Secondary securities market is where previously issued securities are traded between investors without the involvement of the issuing company and proceeds from the sale of securities go to the selling investor, not the issuing company (stock exchanges, over-the-counter markets)

Investment Bankers and Stockbrokers

• Investment bankers assist companies in issuing securities and raising capital by advising on the type and price of securities to issue, underwriting securities offerings by purchasing securities from the issuing company and reselling them to investors, and helping navigate regulatory requirements and market conditions
• Stockbrokers act as intermediaries between buyers and sellers of securities by executing trades on behalf of clients in the secondary market, providing investment advice and market research to clients, and earning commissions on securities transactions they facilitate (must be licensed and registered with regulatory authorities)