Personal Finance

Financial intermediaries of stock markets3 min read

January 18, 2021 3 min read

Financial intermediaries of stock markets3 min read

Reading Time: 3 minutes

In any transaction there are people or entities involved apart from buyer and seller, such entities in the stock market are termed as intermediaries.

The financial market is divided into two parts: the primary market and secondary market and intermediaries for both the markets are different. Let us understand their functions in detail.

Primary Market

The primary market is where companies offer their shares for the first time to the general public, the offer period is usually known as an initial public offering (IPO), after which the shares are generally traded in the secondary market on a daily basis.

Intermediaries that facilitate initial public offering are share transfer agents, registrar, merchant bankers, underwriters, credit rating agencies, and custodians.


Any primary market issue has registrars (registered with SEBI) to take care of activities such as collecting investor applications, keeping a record of these applications. Registrars also keep a record of money received from investors or money paid to sellers of shares and assisting companies in order to determine the allotment of shares by consulting stock exchanges.

Registrars also look at the process of finalizing the allotment of shares to the ones who have applied for the same and also dispatching allotment letters and other documents.

Merchant Bankers

Merchant bankers’ job is to determine the capital structure of the company and draft a prospectus and application forms that are submitted to SEBI for approval of listing stocks on exchanges.

Merchant bankers also look at all the compliance formalities and are also responsible for appointing registrars

They also look at the listing of securities, the arrangement of underwriting, placing issues, selection of brokers, bankers to the issue, publicity and advertising agents, printers, and so on.


Underwriters play an important role at the time of listing any new companies because they agree to buy all the securities if the share issue is not fully subscribed.

They make sure that the share issue is fully subscribed by themselves or by others. Underwriters are appointed by the companies in consultation with merchant bankers.

Secondary Market

Once the shares are made public with an initial public offering, they are traded in the secondary market.

Stock Brokers

Stock brokers are direct links between you and markets and they are the ones who facilitate trade in secondary markets, you can place an order with any SEBI registered broker such as Paytm Money because you cannot directly place an order in the market.

You need to transfer money to your broker in order to buy or sell shares, and the broker ensures that the trade is executed and you receive the said shares.


Depository holds all the records and share certificates of every investor having a demat account. Every listed entity has to become a member of a depository where they can maintain all records of shares issued by them.

India has two depositories – NSDL (National Securities Depository Ltd) and CDSL (Central Depository Services Ltd)

Depositories are regulated by SEBI and depositories ensure that the regulator has information about all shareholders of listed companies.

Clearing Corporation

Clearing Corporation in equities ensures that the trade is executed successfully and the investors’ Demat account is credited or debited with shares.

Clearing Corporation guarantees the delivery of shares and ensures total transparency in buying and selling shares.

Share Transfer Agents

Share transfer agents is someone appointed by a company who maintains records of the shareholders of securities issued by companies.

Share transfer agents also deal with the transfer and redemption of securities.


Intermediaries play an important role in the day to day market transactions and ensure that there are checks at all points of trade and there isn’t any misleading or misrepresentation of the company. SEBI regulates all the intermediaries and makes sure that none of them are involved in any kind of malpractices.