Agriculture in Stock Exchange II – JSS3 Agricultural Science Lesson Note (Second Term)

Types of stock exchange 

The stock exchange (capital market) is divided into two types

These are the Primary market and the secondary market.

1.   Primary Market: this is also called the new issue market (NIM). It is a capital market where newly issued securities are offered to the public. In a primary market, a transaction (buying and selling of securities) takes place directly between the issuer and buyers or investors for the first time.

The primary market usually raises capital through the following means.

1.     Public issue
2.   Right issue
3.     Private placement
4.   Preferential allotment

Features of the Primary market

1.           It is a market for new, long-term capital
2.         Securities are issued by the company directly to investors
3.    The company issues certificates to investors (buyers)
4.      It is usually used for selling up new businesses or expanding existing ones 

Secondary market

This is a market where investors trade (buy and sell) securities they already own without the involvement of the company that issued the securities in the primary market. It is also called “aftermarket” because it is where the securities issued at the primary market are bought and sold.

There are two types of secondary market. These are auction markets and dealer markets.

1.     Auction market
2.   Dealer market

Features of the Secondary market

1.       It creates liquidity (means of converting security to cash)
2.       It is a security market for previously issued securities
3.  It comes up after the primary market
4.     Securities are not issued directly by the company to investors in a secondary market.

Importance of stock exchange in agriculture

Agricultural stock exchange is a mutual organization which is engaged in agricultural commodities such as agricultural products and machines. It is very important for several reasons. Some of these include the following. 

1.           Capital Formation
2.           Savings culture
3.   Security market
4.     Investment opportunity
5.    Control of agricultural business
6.     Better performance