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What are the key differences between primary and secondary markets?

Curious about financial markets

What are the key differences between primary and secondary markets?

In the context of financial markets, the primary market is where new securities, such as stocks or bonds, are issued and sold for the first time to investors by the issuing companies. This process is also known as an initial public offering (IPO) in the case of stocks. The primary market is where companies raise capital by selling their securities to investors for the first time. The price of securities in the primary market is determined by the issuer and is often based on a variety of factors such as the company's financial performance, market demand, and prevailing economic conditions.

On the other hand, the secondary market is where previously issued securities are traded between investors, without any involvement from the issuing company. The secondary market is where investors buy and sell securities that have already been issued and are now available for trading. The price of securities in the secondary market is determined by supply and demand, based on factors such as investor sentiment, market trends, and company performance.

In summary, the primary market is where securities are issued for the first time and the price is determined by the issuer, while the secondary market is where previously issued securities are traded and the price is determined by supply and demand.

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