Capital Markets have 2 important funtions :
1. Primary ~ providing new capital for business and other activities, usually in the form of shares issues to new or existing securities shareholders (equity), or loans.
2. Secondary ~ trading existing securities thus enabling share or bond holders to dispose of their holdings whenever they wish.
An active ‘secondary’ market is therefore a necessary condition for an effective primary market as no investor wants to feel ‘locked in’ to an investment which cannot be realized when the need arises.
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