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Questions and Answers
Which market refers to a market where already issued securities and financial instruments are traded?
What is the main difference between an exchange and the OTC market?
What does OTC stand for?
What is the role of an exchange in trading securities?
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Which market is under the supervision of the exchange?
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Study Notes
Financial Markets Overview
- The secondary market involves trading already issued securities and financial instruments.
- Investors buy and sell securities that have previously been distributed in the primary market.
Exchange vs. OTC Market
- The main difference between an exchange and the over-the-counter (OTC) market lies in regulation and structure.
- Exchanges are formal, regulated venues where transactions are executed, while OTC markets are decentralized and less regulated.
- Exchanges usually provide more liquidity and transparency compared to OTC markets.
Terminology
- OTC stands for "Over-The-Counter," referring to the trading of financial instruments directly between parties without a centralized exchange.
Role of an Exchange
- Exchanges facilitate the trading of securities by providing a platform for buyers and sellers to connect.
- They help ensure fair pricing, enhance liquidity, and provide regulatory oversight, enhancing investor confidence.
Market Regulation
- The exchange supervises the activities within its trading platform, ensuring compliance with related regulations.
- Securities traded on exchanges are subject to stricter rules compared to those traded in the OTC market.
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Description
Test your knowledge on cash equities, including the different types of equity shares, primary and secondary markets, the IPO process in the Indian market, various stock exchanges and financial centers worldwide, trade economics for the equity market, and the difference between OTC and exchange markets.
