What are Secondary Markets?

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Under the Secondary Market formerly issued monetary instruments like stock, bonds, futures, equity shares, debentures, treasury bills, and options are sold and purchased. Dealing of all securities is done under this market. It includes both equity and debt market. When the company issues shares for the first time, they are tender directly to the investor or public in the primary market. After the initial public offering (IPO) is ended, then they are traded in the secondary market. The significant distinction between the two is that in the Primary market, an investor gets a direct offering of securities from the company. In contrast, secondary market securities are purchased from the investors who are selling them. The presence of a Secondary Market is very mandatory for the smooth and systematic working of the capital market. Examples of secondary market are: New York Stock Exchange (NYSE) and National Association of Securities Dealers Automated Quotations (NASDAQ)

Features of Secondary Market: Functions of Secondary Market: Objectives of secondary market.

  • Liquidity: The most crucial feature of Secondary Market is that it gives the facility of liquidation to its contributor. Due to the presence of several buyers in the market, a seller can sell his or her stock in quickly in the secondary market whenever he needs cash.
  • Dynamic: Another function of Secondary Market is that it is very dynamic; it changes in no time. If there is any new growth in the security, the secondary stock market immediately adjusts the price. For, e.g., if the company got any new tender from the government the news goes viral in the public domain then the stock price will rise quickly responding to the report of the company getting new bid from the government.
  • Cheap: Transaction costs are very reasonable under the Secondary Market because of so many transactions.
  • Price: Price of security is another Objectives of secondary market. In secondary market prices of securities increases if demand is higher the supply and vice versa.
  • Saving: Secondary Market gives the opportunity to the public who doesn’t find fixed deposit and gold more profitable. They can invest in equity stock out any listed company under the secondary market.
  • Place: SEBI is the place provided by the stock exchange for purchasing and selling of securities at any time by the investors.
  • Benchmark of economy status: Secondary Market gives a signal of the position of the health of the economy of the country with its organizes stock.