Primary Market Vs Secondary Market





(1) Primary Market



(2) Secondary Market









(1) Primary Market





When a privately owned company wants to raise a lot of money, kind kind of funding required to help the company grow to its full potentials, its owners may turn to an investment banker. Unlike brokers who helps facility on trades on the secondary market, investment bankers guide companies down in stock market, helping them turn privately owned business into publicly traded companies.





The primary market is where stocks are actually created and sold which is called of "floated" to the public for the first time. The first sale of stock by a company to the public is an initial public offering, or IPO. And though technically these IPO shares are sold to the public, it's not to the general public; rather these, shares are mainly sold to large institutionally investors that have the kind of capital the issuing company is trying to raise.







(2) Secondary Market





Everyday trading takes place on the secondary market, what people think of as the stock market. These trades take place on the major stock exchanges all around the world, such as NSE, NYSE, NASDAQ, and the London Stock Exchange (LSE).









The are two different categories in the secondary market. Auction and dealer markets. The auction market is home to the open mechanism where buyers and sellers meet in one place and declare the prices they are willing to purchase and sell their securities (stocks). The NYSE is one such example. In dealer markets, people trade through electronic networks. Most small scale investors trade via dealer markets.



The secondary market can can be further broken down into two groups of categories:





Auction Market



In the auction market, both individuals and institutions involved in trading securities meet in one location and declare the prices they are prepared to buy and sell. These are called bid and ask prices. A customer approaches a broker with a order for a deal. The broker will connect with the trader on the board.



A floor trader follows the brokers wishes and checks for the best bid or asks specialists for an offer. A specialists for an offer. A specialists role is to ensure that trading traffic flows smoothly by making it easy to trade a specific stock, and on any given day most specialists manage between ten to fifteen stocks somewhere.



A professional responsible for posting bids and asking offers, holding stocks inventories (to encourage trading), and actually carrying out the trades. specialists serve as matchmakers for bidders and askers connecting as many as possible. They would also buy for and sell out of their own stock supply if necessary.





Dealer Market



Like the New York Stock Exchange (NYSE) auction style trading floor, the NASDAQ deals with more than 700 securities known as market makers. They are also putting up their own money to provide investors with a liquid market, making it easier for them to buy and sell shares.



While the name tends to suggest that market makers are individual traders, the majority are large investment companies (at least on the NASDAQ). That's how they can hold a large stock of inventories on hand, which can be sold while placing orders.



There is a lot of variation in the companies to intense competition. Since the exchange is entirely computerized, market leaders are not doing business either face-to-face, or even over the internet. Both trading is conducted electronically on NASDAQ.



Here, in the secondary market, trades take place between investors, without the involvement of the issuing companies. For example, if you buy shares in Tata Motors, you are purchasing those shares from another investor; the Tata Motors company itself is not directly involved in this transaction.The are two different categories in the secondary market. Auction and dealer markets. The auction market is home to the open mechanism where buyers and sellers meet in one place and declare the prices they are willing to purchase and sell their securities (stocks). The NYSE is one such example. In dealer markets, people trade through electronic networks. Most small scale investors trade via dealer markets.The secondary market can can be further broken down into two groups of categories:In the auction market, both individuals and institutions involved in trading securities meet in one location and declare the prices they are prepared to buy and sell. These are called bid and ask prices. A customer approaches a broker with a order for a deal. The broker will connect with the trader on the board.A floor trader follows the brokers wishes and checks for the best bid or asks specialists for an offer. A specialists for an offer. A specialists role is to ensure that trading traffic flows smoothly by making it easy to trade a specific stock, and on any given day most specialists manage between ten to fifteen stocks somewhere.A professional responsible for posting bids and asking offers, holding stocks inventories (to encourage trading), and actually carrying out the trades. specialists serve as matchmakers for bidders and askers connecting as many as possible. They would also buy for and sell out of their own stock supply if necessary.Like the New York Stock Exchange (NYSE) auction style trading floor, the NASDAQ deals with more than 700 securities known as market makers. They are also putting up their own money to provide investors with a liquid market, making it easier for them to buy and sell shares.While the name tends to suggest that market makers are individual traders, the majority are large investment companies (at least on the NASDAQ). That's how they can hold a large stock of inventories on hand, which can be sold while placing orders.There is a lot of variation in the companies to intense competition. Since the exchange is entirely computerized, market leaders are not doing business either face-to-face, or even over the internet. Both trading is conducted electronically on NASDAQ.



#Ticker Trivia





When company purchases its own shares on the secondary market, it's called a stock buyback.





The OTC (Over The Counter) Market



The over the counter market, or OTC market, contains securities known as "unlisted stocks," which means that such stock are not exchanged on traditional stock exchanges, such as the New York Stock Exchange (NYSE) or National Association of Securities Dealers Automated Quotations (NASDAQ).



Instead, securities bought and sold on the OTC are traded by individual broker dealers, professionals who communicate with each other directly through the internet or by phone.



Buying OTC stocks is somewhat different from buying stock exchanged on major exchanges, in that there is no central exchange where buyers and sellers compete. Rather, you can only buy shares from a market owner, who actually needs to hold a stock inventory for sale.



You usually have to hire the services of a broker who is willing to negotiate with the OTC shares and not all of them do. Your broker will then contact the market dealer for the protection you wish to buy. The market maker for the securities you wish to buy.



The market maker must call his request price, which is the sum he is willing to accept for the shares. The method works the same way to sell OTC shares: the broker will contact the market market to inquire about the price of his bid and asks. Quotes for bid and asks appear on the OTCBB (Over-The-Counter-Bulletin-Board), so investors can track them.



The process seems to be easy, but risky. Companies traded on the OTC market are typically too small to be listed on a formal exchange so it can be very difficult to find accurate information about them. On top of that, OTC shares are not liquid, and when you are able to do so it can be very hard to sell them.





Pink Sheets



"Pink Sheets" are so called because the trading details was written on pink paper. To be listed on the pink sheets, an unregulated offshoot of the Over-The-Counter (OTC) market, all a corporation needs to do is complete a from and file it with OTC Compliance Unit. Most of the form that the client asks for is the current financial details.



Many firms offer more accurate financial reports to their market holders, including open access to their accounting books. Which makes it easier for market makers to determines the right stock price. But because companies aren't expected to do so, many don't. They don't have to file any paperwork with the Securities And Exchange Commission (SEC), so it would be hard for investors to get accurate or verifiable details before they invest.



On top of this companies trading over the pink sheets are generally very small, and only few individuals actually own their shares. For such a small demand it can be very difficult for investors when they try to sell their shares.





Important Key Points Primary Market And Secondary Market



* The Primary market is where securities are produced, while the secondary market is where transact such securities.



* In the primary market, companies are sell new stocks and bonds to the public, such as through an initial public offering (IPO).



* The Secondary Market is essentially the stock market, and refers to the different stock exchanges like; New York Stock Exchange, Nasdaq, National Stock Exchange (NSE), Heng Seng Index and other exchanges worldwide.



* Securities can be sold once in the primary market, whereas in the secondary market it can done an infinite number of times.



* The primary market the amount received from the securities are the income of the company, but in the in the secondary market it is the investors income.



* The primary market is located in a single area and has no regional reach, because it has no operational set-up. Conversely, as a stock exchange situated in a specific geographical location, the secondary market physical presence.



* A business seeking to raise capital has to be subject to a lot of scrutiny and due diligence as it decides to sell its primary market shares. The secondary market requires no such necessity of any sort.



* Investment banks typically carry out the position of underwriter to the issue and thus serve as intermediaries in the primary market issuance process. Whereas it is the brokers in the secondary market who serve as middlemen or intermediaries between investors.





Politics And The Stock Market





In the midst election year, particularly one market pronounced uncertainty, the overall market tend to decline. Once a new president / prime minister is elected and takes over, the market tends to follow fairly predictable pattern. Normally, the first year of first terms brings market volatility as the new administration settles in.



The second year in office normally brings mild overall gains, followed by stronger returns in the third years; on average but not always, stock prices tends to increase by about 17% during the third year of a first term. By the second term, returns bring to settle down, though still increase to an average above 10% a year. Then, volatility comes back as the election season gets underway, leading to more shallows returns.











Final Thoughts - Primary Market Vs Secondary Market



The stock market acts as an important source of financing for the companies through its main and secondary market and helps in mobilizing the funds. The primary market thus helps to do exactly the same thing by helping companies gain access to these resources.



Via its numerous exchanges, Secondary market tends to act as the economies barometer and thus tends to represent the countries general health and economic conditions by offering a ready platform to gauge the current investor minds.





Also Read:



* What Is Stocks? Definition And Types Of Stock Prime ministerial / Presidential terms stages aren't the only factors influencing the stock market. Who ends up in the Oval Office has a clear impact as well, most notably party lines.The stock market acts as an important source of financing for the companies through its main and secondary market and helps in mobilizing the funds. The primary market thus helps to do exactly the same thing by helping companies gain access to these resources.Via its numerous exchanges, Secondary market tends to act as the economies barometer and thus tends to represent the countries general health and economic conditions by offering a ready platform to gauge the current investor minds.

When people talk Stock Exchange or "The Market," they usually refer to secondary trading market, the vast majority of investors buy and sell stock. But the primary market is the place where everything starts.The biggest distinction between primary market and secondary markets are the players involved: major investors are buying stock directly from the issuing company on the primary market; investors buy and sell shares to each other on the secondary market.Both equity and debt instruments such as equity shares, preference shares, debentures, bonds protected premium notes and the like are bought and sold on the stock market, as well as cover all forms of lending and borrowing.Capital markets consists of those institutions and structures which combine medium and long term funds and make them available to individuals, businesses and government. In it are include both private placement outlets and regulated market such as stock exchange.So, basically there are two types of capital market.In this topic, we learned about primary market and secondary market. Now we will see the types of capital market. The term capital market applies to any part of the financial system that leverages capital from debt, shares and other assets. In the primary capital market, new stocks and bonds are created and sold to investors, while in the secondary capital market, investors trade securities.