What Are Primary And Secondary Markets?

Markets can be broadly classified into primary and secondary markets. A primary market is where securities are sold directly by the issuer. A secondary market is where securities trade between market participants after the security has already been issued.

Company shares example

A company who wants to raise funds through the equity market may issue shares in an Initial Public Offering (IPO) and shares would be sold directly to the public by the company (or through another institution). These are the first transactions, the primary transactions that the shares will go through in their life-time. The transactions are said to be in the primary market.

Those who bought shares in the company through the IPO may later wish to sell those shares. Secondary markets exist where the shares can be bought and sold after they have been transacted in the primary market. An individual can sell their shares on a secondary market like the ASX to another market participant. The shares will continue to trade on the secondary market.