Regulation of Securities Markets

Abstract

‘Why securities markets exist and the way they work are questions which lend Ives to relatively casier analysis and treatment in comparison to how these markets 10 be regulated. The economic purpose served by securities markets is plain. markets provide a source by which businesses obtain equity capital and long- debt from the public. The markets themselves have two distinct components : primary and the secondary markets. The primary markets are also at times referred as the “new issues” markets as opposed to the “trading” or “secondary” markets. “The two are interlinked very closely. Companies raise needed capital and funding through he primary markets but this function is best performed if purchasers of securities at he primary level are enabled to sell these securities, if need be at a price level reasonably related to the initial offer price. Hence, the language of “liquidity” enters the arena. “The underlying idea is as atractive as it is plain : investors will provide capital and funds to companies by purchasing new issues if they are assured of liquidity.