Nature of Financing

Another aspect related to the separate functions of these two parts of the market is the nature of their contribution to industrial financing. Since the primary market with new securities, it provides additional funds to the issuing companies either for a new enterprise or for the expansion of diversification of the existing one and, therefore, contribution to company financing is direct. In contrast, the secondary markets can in no nee supply additional funds since, the company is not involved in the transaction. This does not mean that the stock markets have no relevance in the process of transfer of from savers to investors. Their role regarding the supply of capital is indirect. The usual in the development of industrial enterprise seems to be that those who bear the initial of financing a new enterprise pass it on to others when the enterprise. The existence of secondary markets which provide institutional for these purchase and sale of securities and, to that extent. lend liquidity and market ability, important part in the process.

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