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What is secondary market?

What is secondary market?

The secondary markets are where most trading goes on today, where the trades are made investor-to-investor using shares that were issued sometime before, and profits are made by investors and not the underlying company who issued the shares originally.

The secondary market is a term used to describe the market created by those who are selling and buying shares which were issued some time ago in what's called the primary market.

The NYSE and the NASDAQ exchanges facilitate trades in the secondary markets. In the primary market, the capital was raised by the company issuing the securities, but in the secondary market, the only money made is by those who are trading the shares.

The secondary market is also where the prices stocks are given a real value by their trading prices over time. At issuance in the primary market, the company and underwriters are only guessing at what price the shares will be likely to trade at, and it can be a bumpy landing.

IPOs are primary market offerings, and investors have to wait the regulatory waiting period before taking the shares into the secondary market to sell them.

Keywords: secondary market, primary market, Initial Public Offering (IPO), waiting period, outstanding shares,