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Difference between primary & secondary market?

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Difference between primary & secondary market?

Postby macbeth » Mon Nov 12, 2012 2:10 pm

Primary markets are where securities (stocks and bonds) are first sold, so generally this is where IPO's (initial public offerings) are done.

Secondary markets are where securities that have been previously sold in the Primary markets are resold. For example the Toronto Stock Exchange, New York Stock Exchange, etc. Any transactions that occur in the Secondary market do not affect the funds of the firms that the securities were initially issued from. The Secondary markets are important because they make financial instruments more liquid (easier to sell to raise cash) and making them more desirable and easier to sell in the primary markets. Another important function of the secondary market is that they determine the prices that firms sell their securities in the Primary market, as intuitively, other firms/entities will not buy securities at a higher price than what they believe people will buy for in the Secondary Market.
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Difference between primary & secondary market?

Postby quade » Mon Nov 12, 2012 2:12 pm

The primary market is direct from the company issuing the stock or bond to the buyer. The secondary market is after the initial public offering, people buy and sell on the stock exchange, NASDAQ or over the counter market or the pink sheets.
For example, IBM issues some new stock. Someone buys it (usually an underwriter, but maybe the public). Assuming IBM sells direct to the public and I buy it for $50 and it goes up to $ 60 and you want to buy it and I want to sell it. So I sell through a broker and you buy through a broker which represents a sale in the secondary market.
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