Primary Market and Secondary market | Difference between Primary Market and Secondary Market

Описание: 🔴 What is Primary Market ??
A market in which securities are sold for the first time is known as a Primary Market. It means that under the primary market, new securities are issued from the company. Another name for the primary market is New Issue Market. This market contributes directly to the capital formation of a company, as the company directly goes to investors and uses the funds for investment in machines, land, building, equipment, etc.

🔴 Features of a Primary Market:
🗣️ New Issue of Securities
Initial Public Offerings (IPOs): Companies issue shares to the public for the first time.
Seasoned Equity Offerings (SEOs): Companies that are already public issue additional shares.
🗣️ Raising Capital
Equity Financing: Issuing shares of stock to raise capital.
Debt Financing: Issuing bonds or other debt instruments.
🗣️ Participants
Issuers: Corporations, governments, or other entities that need to raise capital.
Investors: Individuals, institutional investors, mutual funds, etc., who buy the new securities.
🗣️ Underwriting
Role of Investment Banks: Investment banks underwrite the issuance, meaning they guarantee a certain amount of capital to the issuer by purchasing the securities and then reselling them to the public.
🗣️ Pricing of Securities
Fixed Price Offer: The price at which the securities will be sold is determined beforehand.
Book Building Process: Investors bid for the shares, and the final price is determined based on these bids.
🗣️ Regulatory Framework
Prospectus: Issuers must provide a detailed prospectus that discloses financial information, risks, and other important details.
Securities and Exchange Commission (SEC): In the United States, the SEC regulates the issuance of securities to protect investors.

🔴 What is Secondary Market ??
A market in which the sale and purchase of newly issued securities and second-hand securities are made is known as a Secondary Market. In this market, a company does not directly issue its securities to investors. Instead, the existing investors of the company sell the securities to other investors. The investor who wants to sell the securities and the one who wants to purchase meet each other in the secondary market and exchange the securities for cash with the help of an intermediary, a broker, is done.

🔴 Features of a Secondary Market:
🗣️ Liquidity: The secondary market provides liquidity to investors, allowing them to buy and sell securities quickly and easily. This liquidity ensures that assets can be converted into cash with minimal price impact.
🗣️ Price Discovery: Prices in the secondary market are determined by supply and demand dynamics. This price discovery mechanism reflects the collective information, expectations, and sentiments of all market participants.
🗣️ Trading Volume: The secondary market typically exhibits high trading volumes. This high volume indicates market depth, meaning there are many buyers and sellers, which helps to stabilize prices and reduce volatility.
🗣️ Market Efficiency: Secondary Markets tend to be more efficient compared to primary markets. Information is rapidly disseminated and reflected in security prices, leading to fewer opportunities for arbitrage.
🗣️ Regulation and Transparency: Secondary Markets are usually subject to regulatory oversight to ensure fair trading practices, protect investors, and maintain market integrity. Regulations require transparency in trading activities, including the disclosure of trade prices and volumes.
🗣️ Variety of Instruments: The secondary market includes a wide range of financial instruments beyond just stocks and bonds. This variety allows investors to diversify their portfolios and manage risk more effectively.

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🔴 This video might be useful for students preparing for -
🗣️ 11th Commerce #11thcommerce
🗣️ 12th commerce boards #12thcommerce
🗣️ CSEET(CS FOUNDATION ICSI) #cseet
🗣️ CA Foundation #cafoundation
🗣️ UGC NET COMMERCE #ugcnetcommerce
🗣️ LLB #llb
🗣️ UGC NET LAW #ugcnetlaw

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🔴 In this video - #padhakulog
Teacher's Name - CS Payal Popli
Topic - Primary Market | Secondary Market | Difference between Primary Market and Secondary Market

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