Primary Market and Secondary Market: Meaning, Example

Meaning of Capital Market

‘Capital Markets’ pertains to ventures that collect capital from some enterprises and make them accessible to other enterprises who require capital. The centre operation of such a marketplace is to enhance the effectiveness of the transactions so that each entity doesn’t need to do a quest and interpret, comprehensive capital transfer and constitute legal contracts.

There are two types of Capital markets. Namely :

  • Primary Market
  • Secondary Market

Primary Market vs Secondary Market

Primary Market Meaning

A primary market is a market place where corporations imbibe a fresh issue of shares for being contributed by the public for soliciting capital to meet their long-term funds necessary like extending the current trade or buying unique entity. It plays a motivational part in the mobilisation of savings in the economy.

Multiple types of an issue made by the establishment are – Offer for Sale, Public issue, Issue of Indian Depository Receipt (IDR), Bonus Issue, Right Issue, etc.,

Secondary Market Meaning

The secondary market is a prototype of the capital market where debentures, current shares, options, bonds, treasury bills, commercial papers, etc., of the enterprises, are patronised amongst investors. The secondary market can be an auction business where the business of bonds is functioned through a dealer market or the stock exchange, usually called Over The Counter This article is a ready reckoner for all the students to learn the difference between the Primary Market and Secondary Market.

You Might Also Like to Read: Money Market vs Capital Market Statement

This article is a ready reckoner for all the students to learn the difference between the Primary Market and Secondary Market.

Primary Market 

Secondary Market

                                                                Definition
A primary market is a marketplace where corporations imbibe a fresh issue of shares for being contributed by the public for soliciting capital to meet their long-term funds necessary like extending the current trade or buying a unique entity. The secondary market is a prototype of the capital market where debentures, current shares, options, bonds, treasury bills, commercial papers, etc., of the enterprises, are patronised amongst investors.
                                                            Also known as 
New Issue Market(NIM) After Market
                                                      Purchasing type
Direct purchase Indirect purchase
                                                        Parties to buying and selling
Buying and selling takes place between the Company and Investors Buying and selling takes place between the investors
                                                          To whom it provides financing
It provides financing to the existing companies for facilitating growth and expansion It does not provide any kind of financing
                                                            Intermediaries involved
Underwriters Brokers
                                                            Price levels
Remains fixed Price level varies with variations in demand and supply.

The above mentioned is the concept, that is elucidated in detail about ‘Difference between the Primary Market and Secondary Market’ for the Commerce students. To know more, stay tuned to BYJU’S.

Must Read Articles for Commerce Students

Leave a Comment

Your email address will not be published. Required fields are marked *