Distinction Between the Secondary and Primary Market

The distinction between a secondary market and primary market is a necessary element of understanding the capital markets sector. A primary market represents the first venue in which securities, such as stocks or bonds, can be offered, while a secondary market can be designated as the setting in which the securities first offered through a primary market are offered for sale. Moreover, a primary market allows investors to purchase these financial products directly from the individuals or groups initially responsible for creating them. The secondary market, on the other hand, represents a venue for transactions between various investors.

The Initial Public Offering of a corporation which has newly made the transition to being publicly traded is considered a primary market transaction. In general, primary market trading is considered underwriting. Secondary market settings include the New York Stock Exchange and NASDAQ. In addition, securities can also be traded through third and fourth markets.

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