Q.Distinction between Primary and Secondary Market.

The primary market deals in new securities issued for the first time and channels fresh funds directly to the company, whereas the secondary market (stock exchange) deals in existing securities traded among investors. Securities can be sold only once in the primary market but repeatedly in the secondary market, and only the secondary market provides a continuous place of trading. ## Primary Market vs Secondary Market | Basis | Primary Market | Secondary Market | |---|---|---| | Meaning | Market for new securities issued for the first time (new issue market) | Market for existing, already-issued securities | | Also called | New Issue Market | Stock Exchange | | Securities dealt | Fresh/new securities | Second-hand/existing securities | | Flow of funds | Funds flow directly from investors to the company | Funds flow between investors; the company does not receive money | | Parties | Between the company and investors | Between one investor and another | | Frequency of sale | A security is sold only once | Existing securities are bought and sold repeatedly | | Place | No fixed geographical place | Located at the stock exchange with a definite place | | Price | Price is fixed by the company/issuer | Price is determined by demand and supply | ## Explanation In the primary market a company issues shares or debentures through a prospectus, public offer or private placement, and the money raised is used for the company's own needs. In the secondary market these securities are later traded among investors on a recognised stock exchange, giving them liquidity. The two markets are complementary: without the primary market there would be no securities to trade, a …