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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.

Stock exchange secondary market

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 basically similar to the regular market, but the trading hours are only in the session I. The transaction settlement mechanism in the cash market is also different, which is T+0, aka settled on the same day the transaction occurs. In addition, the cash market is usually used for rights issue and warrants.

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 issue and warrant transactions.

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).

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