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What is meant by the 'Secondary Market'? How do you sell on a 'seconday market'?

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What is meant by the 'Secondary Market'? How do you sell on a 'seconday market'?

Postby aviya63 » Fri Mar 22, 2013 2:54 pm

If there is a 'secondary market' does that mean there is a 'primary market' or first market??? Again, Thank you. p.s. yes there are a number of finanicial websites but none of them explain concepts in plain English.
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What is meant by the 'Secondary Market'? How do you sell on a 'seconday market'?

Postby ramiro » Fri Mar 22, 2013 2:56 pm

this qn had been answered before so i will try to answer it as best i can

The secondary stock market or the after-market is the one that most are familiar with because of all the media attention. This is where the stocks and bonds are traded after the IPO is over and done with. This is where brokerage firms, stockbrokers, stock investors interact all the time as they buy this stock and sell that bond and the like. Also there is a greater variety of investments that are derivatives for previously issued shares like stock options, warrants, the older stocks and bonds, repackaged mortgages, etc You as the stock investor does not have to deal with the issuing company to get the stock as you would have to do when in the primary stock markets. When you want any stock, you get them through a broker or another investor willing to sell them to you. The secondary markets are the ones that you know of like the London Stock Exchange, Nairobi Stock Exchange, New York Stock Exchange etc. This is where all the complicated things go on

Knowing this, you should also know a little about what the primary stock market is even if it really wasn't in the qn

The primary stock market or the new issue market is the one that few investors are familiar with as it deals with the issue of new securities or Initial Public Offerings. Something that you have to understand is that a company goes public to get funding for its business by selling off part of the business in form of the shares. When a company wants to go public, it has to go through an underwriter- just a fancy name for investment bank- a kind of middleman that handles the intricacies of the deal like the number of shares to be floated, the starting price of each share, which institutional investors get first dip and the like. So in a sense floating the shares is a way of the company to get long term funding from the capital markets. While the underwriters handle the details mentioned above, it is the company that receives the cash from the investors and in turn gives out the stock/bond certificates. This is the only time that a business will receive cash from the capital markets or investors in exchange for part of the business (or the financial assets) and this is why the deal is done in the primary markets.

Another way of defining the primary stock market is if the funds go directly from the investors (or the buyer of the shares) to the issuer (or the company going public).

I think you are good now huh?
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What is meant by the 'Secondary Market'? How do you sell on a 'seconday market'?

Postby achav » Fri Mar 22, 2013 3:03 pm

Plain English?

Okay, but keep in mind that technical jargon serves a purpose when it limits itself to specific and highly technical things.

Primary market = Company sells directly to the public.

Secondary market = Company not involved in the transaction anymore. Sellers are the public as well.

Please note that I am leaving out technical but important details to cut right to the heart of the difference.
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What is meant by the 'Secondary Market'? How do you sell on a 'seconday market'?

Postby rey » Fri Mar 22, 2013 3:23 pm

In the case of bonds.
You are buying a bond that someone else no longer wants.
They want to sell it - lets say to buy stocks.
(not a new issue)

You will get charged some brokerage fees a bit higher on the secondary market.
Keep an eye on them.

To sell to a secondary market - just click on the sell button.
You will never know you sold on the secondary market.
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