Primary Market
This is also called the new issue market (NIM). it is a capital market where newly issued securities are offered to the public.
In a primary market, a transaction (buying and selling of securities) takes place directly between the issuer and buyers or investors for the first time.
The primary market usually raises capital through the following means.
- Public issue
- Right issue
- Private placement
- Preferential allotment
Features of the Primary market
- It is a market for new, long-term capital
- Securities are issued by the company directly to investors.
- The company issues certificates to investors (buyers).
- It is usually used for starting up new businesses or expanding existing ones
Secondary market
This is a market where investors trade (buy and sell) securities they already own without the involvement of the company that issued the securities in the primary market. It is also called “after market” because it is where the securities issued at the primary market are bought and sold.
There are two types of the secondary market. These are the auction market and dealer market.
- Auction market
- Dealer market
Features of the Secondary market
- It creates liquidity (means of converting security to cash)
- It is a security market for previously issued securities
- It comes up after the primary market
- Securities are not issued directly by the company to investors in a secondary market.
See also