The market doesn’t include trading the products. The bonds, shares and sticks many things that are being traded as an investment come under the Primary and Secondary Market. They both have different levels of policies related to them.
Primary Market vs Secondary Market
The main difference between Primary and Secondary markets is that the one helps the company in building securities while the other (Secondary Market) is the market that helps the company to build its own cost. In the Primary Market, the stocks are issued, and in the secondary markets, the stocks are traded after getting issued. The money variation of the stocks is seen in the Secondary market while the cost of the share is fixed in Primary Market only the number of shares they are brought makes the differences in the shares buying.
The Primary Market comes into play when the company sells its stocks for the first time. The Primary Market doesn’t involve the Brokers and is directly comes from the company. The Primary Market is the market where securities are built. The Initial Public Offering is the best example of the Primary Market. The investor has the permission either to invest a wholesome amount or in small monthly payments.
The Secondary Market is the market that comes into action when the stocks are sold, and then the trading of stocks takes place. The Secondary Market includes the Brokers. In the secondary market, the trading occurs between different traders, and the cost of the stocks also varies on the need of the stocks.
Comparison Table Between Primary Market and Secondary Market
| Parameters of Comparison | Primary Market | Secondary Market |
| Definition | The Primary Market is used as the market where the company sells its shares and stocks directly. | The Secondary comes in after the shares and stocks are sold. It is like inside trading. |
| Other names | The Primary Market other name is New Issue Market. | The Secondary Market other name is After Issue Market. |
| Main objective | The main objective of the Primary Market is to build securities. | The main objective of the Secondary Market is to do trading of the stock and increase the share cost. This helps the company to increase its value. |
| Work Process | The Work Process involves direct sales by the company with no intermediate. | The work process doesn’t include direct sales by the company. |
| Sales | The Sales is done by the Company itself. | The sales are done via the brokerage and the shares are not being sold by the company itself. |
| Cost | The cost of the share is fixed in the primary market. | The cost varies according to the need of the stocks and shares. |
| Example | The IPO is the best example of the Primary Market. | The National Stock exchange is the best example suited for the Secondary Market. |
What is Primary Market?
The Primary Market is used to build security by the company. The Primary Market comes into action when the company first time allows the public to buy their shares. Therefore, the other name of Primary Market is New Issue Market. The best example of the Primary Market is (IPO) Initial Public Offering.
The Primary Market is best to get capital for their company by the public offering. This is a kind of investment that a person can do. The person gives the money either in installment or as wholesome for some time to the company, and the company uses it as capital to build its resources. Primary Market investments start from the period of one year to around 10 years and more. Yet, the investment can even take place from the lowest amount of Rs.100.
The Primary Market can be used by the Company to build capital. The types of Primary Market investment are Preferential Allotment and Private Placement. The Preferential Allotment is done in the form of bonds and stocks which are not available to the public. But, the Private Placement allows the company to sell the shares to the public directly.
What is Secondary Market?
The Secondary Market comes into action when the Primary Market shares have been sold. The Secondary Market includes trading within the brokers of the shares and stocks. The other name of the secondary market is After Issue Market or Stock Market. In this market, traders invest among themselves.
The Secondary market has a function in the cost of stocks which depend on the need for the shares. The Secondary Market does not involve the direct involvement of the company. Like if you want to buy the share of Company A, then you have to buy it through a brokerage B. The bonds are formed of these stocks, and the investor is paid the amount as mentioned in the asset. But the investor can also sell the binds to others on the little profit if they want.
The Secondary market includes auctioning market where the buyer and the seller bid on the shares. Dealer Market where the buyer and seller are connected via a digital network. The Dealer Market is also called Over the Counter (OTC) Market. Where shares are listed of the company and the buyers contacts the seller to buy the stocks.
Main Differences Between Primary Market and Secondary Market
- The Secondary doesn’t involve the company directly, while the primary market involves the company directly.
- The Primary Market shares and stocks are directly sold by the company, while in the secondary market, the brokerage is involved.
- The Primary Market is where securities are built, while in the Secondary Market, trading is done by the traders among themselves.
- The Cost in Primary Market is fixed but in the Secondary Market is keeps fluctuating.
- The Primary Market is where the shares and stocks are sold for the first time, whereas in the Secondary Market, the stocks are traded after issuing.
Conclusion
The Primary Market, as the name tells its meaning, means the Market which comes before and the Secondary Market which comes after it. The Primary Market allows the public offering and without the involvement of the other intermediates. Thus, providing a way to the public of an investment. While the Secondary Market helps in the trading of the stocks on an inside level, this also helps the company to increase its share prices which later helps in increasing the company value.
Both markets have remarkable benefits in the company capital and help in increasing investment and the cost of the company at their level.
References
- https://www.tandfonline.com/doi/abs/10.1080/1351847032000143422
- https://pubsonline.informs.org/doi/abs/10.1287/mnsc.48.6.719.189