The term “market” can have several exclusive meanings; however, it’s used mostly to indicate the primary market and the secondary market in stock markets. The place where shares are created and sold by the company itself is called the primary market, whereas the marketplace where the shares are traded among buyers and investors with a broker is called the secondary market.
Without them, the capital markets could be tons more difficult to navigate and much less profitable. Let’s see how these markets function and how they relate to traders and investors.
Differences between Primary and Secondary market:
|Primary market||Secondary market|
|Also known as||(NIM) – New Issue Market||(AIM) – After Issue Market|
|Definition||It is a market where new shares are issued.||It is a place where already issued stocks are traded among investors.|
|Purchasing Type of the Stock||Direct Type||Indirect Type|
|Role of the market||It is a marketplace where stocks are issued for the first time.||It is a marketplace where stocks are traded once they are allotted.|
|Mediators||Investment banks||Agents, Dealers, Brokers|
|Sales of trades||Shares are sold directly by companies to investors.||Shares are sold and purchased amongst buyers, traders and investors.|
|No. of times shares can be sold||Only One time||Numerous Times|
|Price of shares||The prices are fixed at a unique value.||Change in cost depends on the supply and demand of stocks.|
In conclusion, these two economic markets, primary and secondary markets play a key role in the development and improvement of the nation’s economy. Primary Market promotes a straight interface between the organization and the buyer. On the other hand, the secondary market is where brokers help out the traders to purchase and trade the stocks among other investors.