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Primary and Secondary Markets #PrimaryMarket #SecondaryMarket

  • The primary market is concerned with the floatation of new issues of shares or bonds.
  • The firms floating new issues to raise funds may be new companies or existing companies planning expansions.
  • The primary market is where securities are created.
  • It’s in this market that firms sell (float) new stocks and bonds to the public for the first time.
  • For our purposes, you can think of the primary market as the market where an initial public offering (IPO) takes place.
  • Simply put, an IPO occurs when a private company sells stocks to the public for the first time.
  • The primary market is also the market where governments or public sector institutions raise money through bond offerings.
  • The important thing to understand about the primary market is that securities are purchased directly from an issuing company.

 

  • The secondary market commonly referred to as the “stock market.”
  • This includes the New York Stock Exchange (NYSE), Nasdaq and all major exchanges around the world.
  • The defining characteristic of the secondary market is that investors trade among themselves.
  • That is, in the secondary market, investors trade previously issued securities without the issuing companies’ involvement.
  • For example, if you go to buy Microsoft stock, you are dealing only with another investor who owns shares in Microsoft.
  • Microsoft is not directly involved with the transaction.

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