Difference Between Primary Market And Secondary Market

A primary market is a cause of new securities. Frequently on a trade, the primary market is where businesses and governments, and other commercial groups go to secure funding by debt-based or equity-based securities. The secondary market is the location where investors and traders trade in securities. This is done after the Initial Public Officer (IPO) is over and the shares are sold in the primary market.

Difference Between Primary and Secondary Market

The primary market is where securities are created. In this market, businesses drift new bonds and stocks to the citizens for the initial time. An IPO, which is an example of the primary market, happens when a private company issues stock to the public for the very first time. But on the contrary, the secondary market is generally related to the stock market. The securities are first given in the primary market for the general citizens for a subscription where a company gets a sum from the investors and the investor, in turn, gets the securities. Hence, they are listed on the stock market for the resolution of trading.

The commercial exchange is a system where new securities are assigned to the populace steadily of varied financial stocks and services, tailored to the necessities of every citizen from all earnings brackets. These commercial articles are acquired and auctioned in the central market, which is divided into Primary and Secondary Markets. These are both separate terms.

We have added the list of differentiate between primary market and secondary market:

Primary vs Secondary Market

Distinguish Between Primary Market and Secondary Market

Relationship Between Primary and Secondary Market

1. The new issue market offers a direct link between the possible investors and the company. By providing safety and liquidity, the stock markets encourage the public to subscribe to the new issues. The capital appreciation and the marketability offered in the stock market are the major factors that allure the investing public towards the stock market. Hence, it offers an indirect link between the savers and the company.

2. The primary market cannot work without the secondary. The secondary market or the stock 5-market offers liquidity for the issued securities. The issued securities are traded in the secondary market providing liquidity to the stocks at a reasonable price.

3. Though the secondary and primary markets are interconnected to one another, their goals and organizational structure are divergent from each other. The health of the primary market is based on the secondary market and vice versa.

4. The stock exchanges through their listing needs, exercise control over the primary market. The company seeking a listing on the respective stock exchange has to comply with all regulations and rules provided by the stock exchange.

Differentiate Between Primary and Secondary Market

Here we have to distinguish between primary and secondary markets:

• The prices in the primary market are fixed. But the rates diversify in the secondary market on the basis of the trade and supply of the traded securities.

• The securities are the first and foremost issue in a market identified as Primary which is then listed on a well-known or recognized stock exchange for dealing, which is referred to as a Secondary Market.

• The investor can purchase shares directly from the company in the case of the primary market, while on the contrary, in the secondary market investors buy and sell the stocks and bonds among themselves.

• The primary market is grounded in a definite place and has no distinct geographical appearance because it has no organizational position. While, the secondary market is near physically, as a stock exchange market, which is present in an absolute topographical region.

• In the primary market, the sum derived from the guards is the earnings of the firm, but in the case of the secondary market, it is the earnings of investors.

• Investment bankers do securities trading in the scenario of the Primary market. In contradiction, financiers work as mediators while trading in the secondary market.

The two business markets play a huge role in the mobilization of capital in a country’s prosperity. The primary market boosts the direct interaction between the companies and the investor while on the contrary the secondary market is where brokers assist the investors to buy and sell the stocks among the other investors. In the primary market buying in bulk of securities, doesn't occur whereas in the case of the secondary market encourages bulk purchasing.