Primary and Secondary Market

The primary market serves as the initial platform for companies and governments to raise capital by issuing new securities to investors. Alternatively, the secondary market facilitates the trading of already issued securities among investors. It provides liquidity to investors who wish to buy or sell stocks, bonds, or other financial instruments previously acquired through the primary market or subsequent secondary market transactions.

In the primary market, transaction participants include the issuing entity seeking to raise funds, underwriters who assist in structuring and selling the securities, and investors who purchase the newly issued securities. On the other hand, the secondary market involves transactions among investors themselves including individual investors, institutional investors, traders, and market makers. The issuer of the securities is generally not directly involved in secondary market transactions once the initial issuance is completed.

Primary markets primarily trade newly issued securities ranging from stocks, bonds, and other financial instruments. The secondary market trades these securities as well. However, the secondary market also includes complex financial instruments like derivatives, providing a broader range of investment opportunities beyond initial offerings.

The primary market provides entities with access to funding necessary for growth and development. It facilitates economic expansion by letting companies raise capital through equity or debt offerings. The secondary market enhances market efficiency by providing liquidity and price discovery. It allows investors to trade securities more freely without regard to economic development.