Q.What is the secondary market? Explain its role in the capital market.

The secondary market deals in securities that already exist, and its main job is to keep those securities tradeable after they were first issued.

The secondary market is the segment of the capital market in which securities that have already been issued in the primary market are subsequently bought and sold among investors. Unlike the primary market, the money paid by a buyer here goes to the selling investor, not to the original issuing company.

Role of the secondary market:

1. Provides liquidity and marketability — investors can convert their holdings into cash whenever they choose, without needing the company's own involvement.
2. Provides continuous price discovery — ongoing trading generates a running, market-tested valuation of every listed security.
3. Operates chiefly through stock exchanges, which supply the trading platform and settlement systems (covered in detail in the following chapter). …

Believing the company receives money every time its shares are traded in the secondary market — it receives funds only once, at the original primary-ma …