Q.Explain how the primary market and the secondary market are related to each other.

The two markets look independent but actually depend on each other to function well.

Although the primary market (new issues) and the secondary market (subsequent trading) perform different immediate functions, they are closely interdependent:

1. The secondary market makes the primary market attractive. An investor subscribing to a new issue is far more willing to do so knowing there will later be a ready market in which to sell that security if needed — without this assurance of liquidity, far fewer investors would be willing to lock their money into a new issue.
2. The primary market supplies what the secondary market trades. Every security traded in the secondary market originated as a new issue in the primary market at some point — without a functioning primary market, the secondary market would eventually have nothing new to trade. …

Treating the two markets as entirely separate/unrelated systems, when in fact investor willingness to participate in one depe …