When you are in the industry and trying to learn how to make investments in a manner that makes sense, you are going to try and learn from the best investors out there. Investors, like your financial advisor near me, are going to tell you that you need to keep an eye on a lot of things to make sense of how to move forward. So, make sure that you look to a professional when learning about primary and secondary markets in the stock market.
Primary Markets: The initial market that securities come from is called the “primary market.” The companies that the securities come from, the federal government and whatever other entities distribute the securities that they create are included in this category. But in order for a stock to be considered in the primary market, the company or other entity must distribute it themselves. Usually these groups rely on secondary markets to distribute their stocks, but companies will often offer new securities or expand old ones through the primary market first.
The primary market is also unique that the initial buyer is the only person who can exchange the securities for funds. So, basically, primary markets are not “exchanges” like you will see on Wall Street. They’re from the company, you don’t trade them, you actually keep them until you decide to sell them back. Very simple.
Secondary Markets: When you hear about the New York Stock Exchange or other exchanges that operate on Wall Street, you are talking about secondary markets. These markets are used for trading stocks between persons and other entities that may purchase them. Needless to say, people involved in the secondary market usually are the ones who buy the securities in the primary markets anyway.