Primary Secondary Markets

Primary Markets

A market where new securities are bought and sold for the first time is called the New Issues market or the IPO market.

1.Nature of Securities:

The primary markets deal with new securities, that is, securities, which were not previously available and are, therefore, offered to the investing public for the first time.

Primary Secondary Markets

2.Nature of financing:

Primary market provides additional funds to the issuing companies either for starting a new enterprise or for the expansion or diversification of the existing one and, therefore, its contribution to company financing is direct.

3.Organisational Differences:

Primary market is not rooted in any particular spot and has no geographical existence. The primary market has neither any

tangible form of any administrative organizational setup like that of stock exchanges, nor is it subjected to any centralized control and administration for the consummation of its business. It is recognized only by the services that it renders to the issuer of the securities and investor of the securities.

Secondary Markets

Primary Secondary Markets

A market in which an investor purchases a security from another investor rather than the issuer, subsequent to the original issuance in the primary market.

1.Nature of Securities:

The secondary market is a market for old securities, i.e. securities which have been issued already and granted stock exchange quotation. The stock exchanges, therefore, provide a regular and continuous market for buying and selling of securities.

2.Nature of financing:

The secondary markets can in no circumstance supply additional funds since the company is not involved in the transaction. This, however, does not mean that the stock markets do not have relevance in the process of transfer of resources from savers to investors. Their role regarding the supply of capital is indirect. The existence of secondary markets provides institutional facilities for the continuous purchase and sale of securities and lends liquidity and marketability thus, playing an important part in the process.

3.Organisational Differences:

Secondary Markets have physical existence in form of stock exchanges located in a particular geographical area.

Primary Secondary Markets

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