Understanding the Regular Market, Negotiated Market, and Cash Market in the Stock Exchange

After going through the initial public offering (IPO) process in the primary market, shares will be traded in the secondary market. The sales proceeds of shares in the secondary market no longer go to the issuer as in the primary market, but to fellow investors who make transactions through the bid and offer process.

The share price in the secondary market will increase and decrease from the initial price at IPO according to the Jakarta Automated Trading System (JATS) auto rejection rules. Apart from the bid and offer rates, the dynamics of the share price are also influenced by a number of factors such as company performance and market sentiment.

Secondary Market Segmentation

The secondary market is divided into several types that have criteria according to the provisions of the Indonesia Stock Exchange. The basic differences of each segment are in the purpose of use, trading unit, trading hours, and transaction settlement mechanism.

1. Regular Market

The regular market is used daily by retail (individual) and institutional investors. The unit of trade in the regular market is the lots where 1 lot equals 100 shares.

This market takes place in session I and II of every trading day with a T+2 transaction settlement mechanism (two trading days after the transaction occurs).

2. Negotiated Market

The negotiated market is used by investors who want to buy or sell stocks by bargaining system, usually stocks with low price and a large number of it. The unit of trading is the shares (not required to be the lots).

Just like the regular market, the negotiated market trading hours are in session I and II. However, the transaction settlement mechanism is not T+2, but according to the agreement of the seller and buyer who remain under the supervision of the exchange.

3. Cash Market

The cash market is generally used to resolve failed transactions in the regular or negotiated markets. Its characteristics are similar to those of the regular market, but trading hours are limited to session I with transactions settled on the same day (T+0). In addition, the cash market is also used for Preemptive Rights (also known as rights issues) and warrant transactions.

Summary of Differences in Regular, Negotiated, and Cash Market Characteristics

Regular Market	Negotiated Market	Cash Market
Used daily by both retail and institutional investors.	Used by investors who want to buy or sell shares with a bargaining system.	Commonly used for right issues, warrants, and resolving failed transactions on the regular or negotiated market.
The unit of trade is the lots.	The unit of trade is the shares.	The unit of trade is the lots.
Trading hours in session I & II.	Trading hours in session I & II.	Trading hours only in session I.
T+2 transaction settlement mechanism.	The transaction settlement mechanism is in accordance with the agreement of the seller and buyer under the supervision of the exchange.	T+0 transaction settlement mechanism.

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Disclaimer: The content is made for educational purposes, not a recommendation to buy or sell a particular stock. PT KAF Sekuritas Indonesia is licensed and supervised by the Financial Services Authority (OJK).