What are the pain points and difficulties that the current primary market financial infrastructure development urgently needs to solve? Are various institutions ready to embrace blockchain technology at a faster pace and invest in its implementation? Only by clarifying these questions can institutions understand the difficulty and commercial value of blockchain implementation in the primary market. Both the primary and the secondary markets are essential for mobilising money in the country. The primary market helps investors engage with the company directly by purchasing the new shares introduced in the market.
The primary market is where securities are first introduced and sold to investors. The secondary market in India includes the BSE Limited (BSE), and the National Stock Exchange (NSE)—the Subcontinent’s two most widely traded exchanges. In India, when companies wish to go public and establish a primary market for their shares, they must get approval from the Securities and Exchange Board of India (SEBI), the equivalent of the SEC in the U.S.
Over-the-counter (OTC) security
Current buyers are offered prorated rights-based mostly on the shares they presently own, and others can make investments anew in newly minted shares. This is where companies first offer newly created stocks and bonds to investors, generally through an initial public offering (IPO). Primary market is the market where company issues securities or bonds first time. I.e, Initial Public Offering (IPO) is a public offering where the company decides to sell stocks to the public for the first time. This is another kind of private placement, where a listed company issues securities in the form of ordinary shares, partly or wholly convertible preference shares or debentures.
A private company can only have its shares listed on the securities exchange if it meets the minimum regulatory requirement of a stock exchange. Strict regulatory requirements are an important feature of the primary market. Another feature of primary markets is that companies work directly with investors unlike in the secondary market where the company is indirectly involved. In a primary market, companies benefit directly from the capital injected by investors. The secondary market is what we commonly think of as the stock market or stock exchange. The primary market refers to the market where securities are created and first issued, while the secondary market is one in which they are traded afterward among investors.
What are the funds collected for?
New securities are issued (created) and sold to investors for the first time in the primary market. The first method of floatation of securities in a primary market is ‘Public Issue through Prospectur’. Under this method, a company issues a prospectus to inform the general public and attract them to invest in the company. The prospectus of a company contains information regarding the purpose for which it wants to raise funds, its past financial performance, its background, and future prospects. The information provided in the prospectus helps the general public, get to know about the earning potential of the company and the risks involved in investing in the company. Based on this information, the public decides whether or not they want to invest in the company.
Rights issue is when companies offer new shares to existing shareholders according to the proportion of their shareholdings so as to raise new capital. A further public offering, (FPO) is a process where companies that are already listed on the stock exchange issue new shares in order to obtain additional funds. Normally, these shares are issued to existing shareholders at a discount for a limited period of time. A ‘seasoned equity offering’ is another name for additional shares issued by companies that are already listed. Also, companies are allowed to register new shares and gradually sell them to the public.
Primary Market and Secondary Market
Although this survey has covered all types of primary financial market participants with different roles, the overall sample size is still limited. A more systematic investigation is required to comprehensively, accurately, and scientifically grasp the district cross-chain application prospects in the primary market. Further refinement and development have not been carried out for specific application details involving the primary market. Based on our research by combining qualitative and quantitative methods, the authors concluded that the most concerning issues in the primary financial market are complex due diligence, mismatch, and difficult monitoring. When the current challenges are combined with the advantages of blockchain technology, it clearly shows that blockchain may be a suitable technology that can solve the above challenges in primary financial markets.
To eliminate this threat, the authors slowed down as much as possible during the interview and confirmed the content once they did not understand it clearly. The card sort step is handled by two authors together, so there is the possibility of mistakes, but the authors have tried their best to avoid them. In this part, the authors first present the findings for each category (a total of three categories) that were identified by utilizing open card sorting on the interview data here are subcategories for each category.
- It is urgent to solve problems with complex due diligence processes, mismatching, and difficulty monitoring.
- After completing each interview, the interviewers would contrast their notes with past ones to check whether there were any new insights from the interview.
- This is another kind of private placement, where a listed company issues securities in the form of ordinary shares, partly or wholly convertible preference shares or debentures.
- They offer them on stock exchanges or markets like the NYSE, Nasdaq, or over-the-counter (OTC), where other investors can buy them.
The original face amount of the purchase is not guaranteed if the position is sold prior to maturity. Instead, we maintain trading relationships with a large number of bond dealers. A measure of a bond issuer’s ability to repay interest and principal in a timely manner.
Primary market transactions’ pain points and difficulties run through all the links of “funding, investment, monitor and withdrawal”. People who need to maintain or increase their assets will invest the money in investment institutions for management. feature of primary market Investment is to find a good company or project to invest in equity or debt. The monitoring is to track and manage invested projects and conduct follow-up reviews. Withdrawal is the process of finally selling the investment product and cashing out.
There’s a primary market for just about every sort of financial asset out there. The biggest ones are the primary stock market, the primary bond market, and the primary mortgage market. The primary market isn’t a physical place; it reflects more the nature of the goods. The key defining characteristic of a primary market is that securities on it are purchased directly from an issuer—as opposed to being bought from a previous purchaser or investor, “second-hand” so to speak.
These shares are bought by qualified institutional buyers who consist of foreign institutional investors, mutual funds, Insurers and public financial Institutions among others. Issuing qualified institutional placements is simpler in that, they do not attract standard procedural regulations. After the initial offering is completed—that is, all the stock shares or bonds are sold—that primary market closes. A market in which the securities are sold for the first time is known as a Primary Market. It means that under the primary market, new securities are issued from the company.
At present, the Cronbach’s alpha coefficient is widely used in the reliability test. In this research, Stata software is used to test the alpha coefficient. The overall alpha coefficient of the questionnaire is 0.97, which is greater than the acceptable range of reliability of 0.7, indicating that the research has a particular reference value. In addition, the questions related to the primary market investigated by the questionnaire have undergone many discussions and revisions, and pre-investigation experiments have been carried out.
In simple words, in the case of primary markets, legal and regulatory requirements are strict which ensure that only quality companies approach stock exchanges for the issue of shares to the public. With equities, the distinction between primary and secondary markets can seem a little cloudier. Essentially, the secondary market is what’s commonly referred to as “the stock market,” the stock exchanges where investors buy and sell shares from one another. But in fact, a stock exchange can be the site of both a primary and secondary market.
This is because private placement shares cannot trade on the secondary market, they are sold only in the primary market. As a result, investors demand price reductions since the shares are regarded illiquid. An initial public offering, or IPO, is an example of a security issued on a primary market.
What are the different Methods of Floatation of Securities in Primary Market?
Although the deployment of blockchain in the primary market is technically viable, the present progress in practice is modest. It is mainly owing to regulatory constraints, and no consistent norm exists (Zhu and Zhou, 2016). Some current regulatory prohibitions will be lifted because of the government’s acknowledgement of blockchain and the technological progress of distributed systems in the future. Besides, the authors have adopted reliability test for the questionnaire. In general, the primary consideration is the internal reliability of the scale and whether there is a high internal consistency between data.
The blockchain-related questions are mainly designed to validate the idea that blockchain technology will improve the infrastructure of the primary financial market. The authors first exchanged their introductory information, such as respective institutions and positions, with the interviewees and then introduced the research and purpose. Next, the authors asked some basic qualitative questions to the interviewees. Then, some open questions are designed to guide the interviewee with the ideal directions (Questions are listed in Table 1).