Primary & Secondary Markets

     Primary and secondary market

1. Primary Market: The primary market refers to the initial issuance or sale of new securities directly by the issuing company or entity to investors. In this market, companies raise capital by selling newly issued stocks, bonds, or other financial instruments to investors. The primary market is where initial public offerings (IPOs) take place, where private companies go public and offer their shares to the public for the first time. In the primary market, the proceeds from the sale of securities go directly to the issuing company, enabling them to raise funds for various purposes such as expansion, research and development, or debt repayment. Investors participating in the primary market typically buy securities directly from the issuing company through underwriters or investment banks.

2. Secondary Market: The secondary market, also known as the aftermarket, is where previously issued securities are bought and sold between investors. In this market, investors trade securities among themselves without involvement from the issuing company. The primary purpose of the secondary market is to provide liquidity and facilitate the buying and selling of securities after their initial issuance in the primary market. The secondary market includes stock exchanges (such as the New York Stock Exchange and NASDAQ) and over-the-counter (OTC) markets where securities are traded. In the secondary market, the price of securities is determined by market forces of supply and demand, and investors can buy or sell securities based on their investment strategies, market conditions, and price fluctuations. The profits or losses made in the secondary market are realized by the investors themselves and do not directly impact the issuing company.

To summarize, the primary market is where new securities are issued and sold for the first time, while the secondary market is where previously issued securities are bought and sold among investors. The primary market involves direct transactions between the issuing company and investors, while the secondary market involves transactions between investors themselves.