ABSTRACT
The basic function of the new issue market is to enable the flow of funds generated within the economy to be made available to those who need them on terms acceptable to the lender; in other words to assist in the efficient transmission of funds from surplus to deficit sectors. An effective new issue market cannot of course operate without an active trading market in securities since the latter provides future marketability of longterm obligations and an indication of the terms on which new capital can be raised. At the company level capital requirements may be met either from internal or external sources and in the latter instance with a choice between short-and long-term borrowing. In the British tradition the volume of long-term capital raised, although variable with the level of industrial activity, had been relatively modest, probably financing about a fifth of the addition to fixed assets, but the role of new issue market in the provision of funds should not be assessed solely in proportion to that figure. For fast-growing firms it has provided a significant portion of funds, for all borrowers an opportunity to choose various proportions of debt or equity depending as to the nature of the business and the desired relation between borrowing and shareholders capital, and it provides as it were a last resort channel where risk capital can be obtained, at a price, from existing shareholders or from new ones if all other sources fail.
