Difference between Primary Market vs Secondary Market

Stock market refers to a collection of markets and exchanges where the issuing
and trading of equities or stocks of publicly held companies, bonds, and other
classes of securities take place. This trade is either through formal exchanges or
over-the-counter(OTC) marketplaces.

The financial market is a world where new securities are issued to the public
regularly of varied financial products and services, tailored to the need of every
individual from all income brackets. These financial products are bought and
sold in the capital market, which is divided into the Primary Market vs
Secondary Market. This is both distinct terms. The primary market refers to the
market where securities are created, while the secondary market is one in which
they are traded among investors.

 The primary market is where securities are created. It’s in this

market that firms float new stocks and bonds to the public for the
first time. An initial public offering, or IPO, is an example of a
primary market. An IPO occurs when a private company issues stock
to the public for the first time. Various types of issues made by the
corporation are a Public issue, Offer for Sale, Right Issue, Bonus
Issue, Issue of IDR, etc. The company who brings the IPO is known
as the issuer, and the process is regarded as a public issue. The
process includes many investment banks and underwriters through
which the shares, debentures, and bonds can directly be sold to the
investors.

For example, company XYZ Inc. hires four underwriting firms to determine the
financial details of its IPO. The underwriters detail that the issue price of the
stock will be $20. Investors can then buy the IPO at this price directly from the
issuing company. This is the first opportunity that investors have to contribute
capital to a company through the purchase of its stock. A company’s equity
capital is comprised of the funds generated by the sale of stock on the primary
market.

 The secondary market is commonly referred to as the stock market. The

securities are firstly offered in the primary market to the general public
for the subscription where a company receives money from the investors
and the investors get the securities; thereafter they are listed on the stock
 exchange for the purpose of trading. This includes the New York Stock
Exchange (NYSE), NASDAQ and all major exchanges around the world.
The defining characteristic of the secondary market is that investors trade
among themselves. In this market existing shares, debentures, bonds,
options, commercial papers, treasury bills, etc. of the corporates are
traded amongst investors. The secondary market can either be an auction
market where trading of securities is done through the stock exchange or
a dealer market, popularly known as Over The Counter where trading is
done without using the platform of the stock exchange.

For example, if you go to buy Amazon (AMZN) stock, you are dealing only
with another investor who owns shares in Amazon. Amazon is not directly
involved with the transaction.

While primary market offers avenues for selling new securities to the investors,
the secondary market is the market dealing in securities that are already issued
by the company. Before investing your money in financial assets like shares,
debenture, commodities, etc, one should know the difference between the
Primary Market and Secondary Market, to better utilize savings.

Key Differences Between Primary Market vs Secondary Market

Both Primary Market vs Secondary Market are popular choices in the market;
let us discuss some of the major Difference Between Primary Market vs
Secondary Market:

 The securities are initially issued in a market known as Primary

Market, which is then listed on a recognized stock exchange for
trading, which is known as a Secondary Market.
 The prices in the primary market are fixed whereas the prices vary in the
secondary market depending upon the demand and supply of the traded
securities.
 In the primary market, the investor can purchase shares directly from the
company. In Secondary Market, investors buy and sell the stocks and
bonds among themselves.
 In the primary market, security can be sold only once, whereas in the
secondary market it can be done an infinite number of times.
  In the Primary Market the amount received from the securities are the
income of the company, but in the Secondary Market, it is the income of
investors.
 The primary market is rooted in a specific place and has no geographical
presence as it has no organizational setup. Conversely, the Secondary
market is present physically, as a stock exchange, which is situated in a
particular geographical area.
 Investment bankers do securities trading in case of Primary Market.
Conversely, brokers act as intermediaries while trading in the secondary
market.

Head To Head Comparisons Between Primary market vs Secondary market

Below is the topmost Comparison between Primary Market vs Secondary
Market:

The basis of Comparison Secondary

Between Primary market vs Primary Market
Market
Secondary market         

Place where
formerly issued
A marketplace for
securities are
Meaning new shares is
traded is
Primary Market
Secondary
Market

New Issue Market

Another name After Market
(NIM)

Indirect
Type of Purchasing Direct
 

Financing It helps to supply It does not

funds to budding provide funding
 enterprises and
also to existing
companies for to enterprises
expansion and
diversification

Multiple times
How many times security
Only once
can be sold?  

Buying &
Buying & selling selling is only
is between between
Buying and Selling
Company and Investors
Investors
 

Investors
Who will gain the amount
Company
on the sale of shares?  

Intermediary Underwriters Brokers

Fluctuates
depends on the
Price Fixed price
demand and
supply force

Not rooted in any

specific spot or It has a physical
Organizational difference
geographical existence
location
Primary Market vs Secondary Market – Final Thoughts
The two financial markets play a major role in the mobilization of money in a
country’s economy. Primary Market encourages direct interaction between the
companies and the investor while on contrary the secondary market is where
brokers help out the investors to buy and sell the stocks among other investors.
In the primary market bulk purchasing of securities does not happen while the
secondary market promotes bulk buying.