Structure of Securities Market
What is the Structure of Securities Market?
The market in which securities are issued, purchased by investors, and consequently transferred among investors is called the securities market.
The securities market has two inseparable segments and interdependent.
Primary Market: The primary market, also known as the new issue market, is where issuers raisecapital by issuing securities to investors. New securities are issued in this market.
Secondary Market: The secondary market make possible trades in already-issued securities, in this mannerfacilitating investors to exit from an investment or new investors to buy the already existing securities.
The primary market makes possible creation of financial assets and the secondary market facilitates their marketability/tradability which makes these two divisions of Financial Markets - mutually dependent and undividable.
What is Mortgage Backed Securities (MBS) and Asset Backed Securities (ABS)?
MBS and ABS are debt instruments issued by institutions against the receivables and cash flows from financial assets such as home loans (MBS), rent receivable, auto loans, credit card receivables and others.
The cash flows mounted up from these assets are utilized to convene the interest and principal repayment commitment on the bonds issued.
The issuer can create liquidity in an or else illiquid asset by securitizing them.The instruments are credit rated and may be listed on stock exchanges.
Financial improvement is an incessant progression and new products keep hitting financial markets on day to day basis.