What is the difference between a primary and a secondary market?

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pohnpei397 eNotes educator| Certified Educator

The difference between a primary and a secondary market is that a primary market is one in which a stock is being offerred directly from a company to investors for the first time.  This happens most commonly during an initial public offer.

In contrast to this, a secondary market is a market in which investors are buying stocks from and selling stocks to one another.  These are stocks that have already been issued by the firm and sold to some investor on the primary market.  When that investor wishes to sell the stock, he or she does so by selling it to some other investor on the secondary market.

The difference, then, is that primary markets involve stocks being sold for the first time by a firm directly to investors while secondary markets involve investors dealing existing stocks with one another.

kipling2448 eNotes educator| Certified Educator

"Primary Market" refers to the initial offering of stocks or bonds to the buying public, as when a previously privately-owned company decides to "go public" by issuing shares of its ownership, or stock, to the public.  In the case of Initial Public Offerings, or IPOs, the stock is sold to the public for the first time, and any subsequent transfer of that stock constitutes what is known as the "secondary market."  

The "Secondary Market," then, refers to the subsequent sell or transfer of stocks and bonds throughout the broader public marketplace through designated exchanges, most prominently, the New York Stock Exchange and Nasdaq.  The stocks bought and sold through these exchanges are no longer in the 'hands' of the original issuing companies, but, rather, are sold from public hands to public hands.

adkinsha | Student

The primary market is direct from the company issuing a stock or bond to the buyer. The secondary market is after the initial public offering