Test: Financial Markets - 1

Primary and secondary markets complement each other. Primary market deals with the issue of new securities. That is, through the primary market a company raises capital directly from the borrowers. On the other hand, secondary market deals in the purchase and sale of the existing securities. That is, once the securities are issued in primary market, they are then traded in the secondary market. It is in this sense that both the markets complement each other.

There are a total of 21 stock exchanges in India, with the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) being the largest.

The National Stock Exchange of India was promoted by leading Financial institutions at the behest of the Government of India, and was incorporated in November 1992 as a tax-paying company. In April 1993, it was recognized as a stock exchange under the Securities Contracts (Regulation) Act, 1956

NSE Clearing Limited (NSE Clearing) (formerly known as National Securities Clearing Corporation Limited, NSCCL), a wholly owned subsidiary of NSE is responsible for clearing and settlement of all trades executed on NSE and deposit and collateral management and risk management functions.

OTCEI (Over the Counter Exchange of India) was incorporated in the year 1990 on the lines of NASDAQ which is the OTC in USA. OTCEI is a fully computerised and transparent stock exchange. It was established with the objective of addressing the needs of small companies and helps in maintaining the liquidity of their securities.

To be listed on OTCEI, the minimum capital requirement for a company is Rs 3 crores and the maximum is Rs 50 crores.

A Treasury Bill is a short-term debt obligation with a maturity of one year or less which enable investors to save their short-term surplus funds while reducing their market risk.

Money market instruments are short-term in nature. The maturity of these instruments is generally less than a year. The maturity of these securities can be as less as one day also.