how securities trade
publicly traded securities are listed on stock exchanges where issuers can seek security listings and attract investors by ensuring a liquid and regulated market in which to trade informal electronic trading systems have become more common in recent years and securities are now often traded over the counter or directly among investors either online or over the phone an initial public offering ipo represents a company s first major sale of equity securities to the public following an ipo any newly issued stock while still sold in the primary market is referred to as a secondary offering alternatively securities may be offered privately to a restricted and qualified group in what is known as a private placement an important distinction in terms of both company law and securities regulation sometimes companies sell stock in a combination of a public and private placement in the secondary market also known as the aftermarket securities are simply transferred as assets from one investor to another shareholders can sell their securities to other investors for cash and or capital gain the secondary market thus supplements the primary the secondary market is less liquid for privately placed securities since they are not publicly tradable and can only be transferred among qualified investors investing in securitiesthe entity that creates the securities for sale is known as the issuer and those who buy them are of course investors generally securities represent an investment and a means by which municipalities companies and other commercial enterprises can raise new capital companies can generate a lot of money when they go public selling stock in an initial public offering ipo for example city state or county governments can raise funds for a particular project by floating a municipal bond issue depending on an institution s market demand or pricing structure raising capital through securities can be a preferred alternative to financing through a bank loan on the other hand purchasing securities with borrowed money an act known as buying on a margin is a popular investment technique in essence a company may deliver property rights in the form of cash or other securities either at inception or in default to pay its debt or other obligation to another entity these collateral arrangements have been growing of late especially among institutional investors regulation of securitiesin the united states the u s securities and exchange commission sec regulates the public offer and sale of securities public offerings sales and trades of u s securities must be registered and filed with the sec s state securities departments self regulatory organizations sros within the brokerage industry often take on regulatory positions as well examples of sros include the national association of securities dealers nasd and the financial industry regulatory authority finra residual securitiesresidual securities are a type of convertible security that is they can be changed into another form usually that of common stock a convertible bond for example is a residual security because it allows the bondholder to convert the security into common shares preferred stock may also have a convertible feature corporations may offer residual securities to attract investment capital when competition for funds is intense 