What is the key difference between the primary and secondary securities markets?

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justaguide eNotes educator| Certified Educator

The primary securities market is the segment of the capital markets where owners of private companies directly sell a part of their stake to investors. This can be done either as an IPO (initial public offering) where shares of the company are offered for the first time, or as an FPO (follow on public offering) where the owners of listed companies divest more of their stake. Once the stock of a company enters the capital markets through the primary securities market, it is traded between market participants in the segment of the capital markets known as secondary securities market.

The difference between the primary market and the secondary market is that in the primary market the owners of the company are the sellers and the investors are buyers. Investors can only buy stock in the primary market. If they want to sell the stock they have bought, it can be done only in the secondary market. The stock of any company is transacted in the primary market only once. All further transactions of the stock are done in the secondary market.