What is primary and secondary debt market?


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Debt market is divided into two parts, secondary market and primary market. New
instruments are issued in the primary market by various participants. The market for bonds
and securities are bought and sold is called secondary debt market. The securities are
already issued by the companies and these securities are traded in this market. The
secondary market is again divided into wholesale market and retail market. Wholesale
debt market comprises of institutions and agencies such as banks, financial institutions,
RBI, primary dealers, insurance companies, provident funds, mutual funds corporate
entities and foreign institutional investors. The two types of transactions are executed in a
wholesale debt market i.e. an outright sale or purchase and a repo trade. The retail debt
market comprises individual investors, small trusts and other legal entities.
No public or rights issue of debt instruments shall be made unless credit rating from a
credit rating agency has been obtained and disclosed in the offer document. In case of
issue of debentures with maturity of more than 18 months the issuer shall appoint a
debenture trustee. A company has to create Debenture Redemption Reserve in case of
issue of debentures with maturity of more than 18 months. The issuer company shall
redeem the debentures as per the offer document. If the issuing company proposes to
create a charge for debentures of maturity of less than S months, it shall file with the
Registrar of Companies particulars of charge under the Companies Act. A letter of option
containing disclosures with regard to credit rating, debenture holder resolution, option for
conversion, justification for conversion price and such other term which the Board may
prescribe from time to time shall be filed with the Board through an eligible merchant
banker in case of non-convertible debentures and partly convertible debentures.


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