Will advice regulation create less efficient markets? The market' consists of primary markets where securities are created and secondary markets where these created. =securities are traded between investors. It is important to understand how the primary and secondary markets for stocks, bonds and other securities are traded and how they differ. Without stocks, bonds, ETFs etc, capital markets will be less efficient. -Companies issue stock or sell bonds for the first time by IPO. This capital raising takes place in the primary market where investors buy these stocks from the issuing company or from a bank that underwrote the stock issue: This capital forms part of the company's equity capital. Business or government may. raise capital outside of share capital by issuing a bond with a coupon or interest rate which forms part of the investors investment return. This debt is repayable at some future time. All primary bonds and stocks purchases are made directly with the issuer of those bonds and stocks in the primary market. PEDOREHT Stocks and bonds are subsequently traded between investors on the ASX or other exchange this is the secondary market. The secondary market promotes safety and security in transactions to encourage good investor behaviour. Although these interactions do not affect the initial equity or debt capital raised, they do provide economic efficiencies by directing financial resources to the benefit of the economy and the people in it. Secondary markets have reduced transaction costs, increased trading opportunities and have promoted better information for investors. Stocks, bonds, managed funds and ETFS are traded through the secondary market." 2.1 Discuss in detail the roles of secondary capital market in the financial system? (10 marks)