Financial Management

Primary Market and Secondary Market

Primary and secondary markets are the forms of markets where financial instruments and created and traded respectively. Primary markets are concerned with the issuance of original instruments like shares, debentures etc. while in the secondary market these instruments are sold and exchanged from one holder to another. These instruments are also called as ‘Securities’.

Hence, some times these markets are collectively known as Security market or security exchange. Every country has it’s own security market.

Most common differences between a primary and a secondary market have been elaborated in the below-given table:


Primary Market

Secondary Market

MeaningA primary market refers to the up which helps the industry to raise funds by issuing different types of securities.The secondary market is a market for subsequent sale/purchase and trading in the securities.
Nature of SecuritiesIt deals with new securities , i.e. securities  which were not previously  available, and are offered  for the first time to the investorsIt a market for old securities which have been issued already.
Sale/ PurchaseSecurities are acquired from issuing Companies themselves.Securities are purchase and sold by the investors without any involvement of the companies.
Nature of FinancingIt provides funds to new enterprises & also for expansion diversification of the existing one.It does not supply additional funds to the company since the company is not involved in transactions.
LiquidityIt does not lend any liquidity to the securities.The secondary market provides facilities for the continuous purchase and sale securities, thus lending liquidity and marketability to the securities.
Organizational differenceIt is not rooted in any particular spot and has no geographical existence. It has neither any tangible from nor any administrative organisational setup.The secondary market has a physical existence in the form of stock exchange and is located in a particular geographical area having an administrative organisations setup.

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