Question

State any three points of differences between ‘Primary Market’ and ‘Secondary Market’.

Hint:

Primary Market = New Issues / Direct from Company.
Secondary Market = Old Issues / Trading among Investors.

Answer 1

Step 1: Identify where these two markets fit.
The capital market, which deals in medium and long-term funds, is divided into the Primary Market, also called the New Issue Market, and the Secondary Market, which is the stock exchange.
Step 2: Explain the basic difference in what each market does.
The Primary Market is where a company issues completely new securities to the public for the first time, while the Secondary Market is where existing, already-issued securities are bought and sold among investors.
Step 3: State three points of difference.
On the nature of securities, the Primary Market deals in new securities and the Secondary Market deals in second hand securities. On the flow of funds, in the Primary Market money flows directly from investors to the company, aiding capital formation, while in the Secondary Market money flows from one investor to another and the company gets nothing further. On location, the Primary Market has no fixed location and issues can happen from anywhere, while the Secondary Market operates from a fixed place, the stock exchange.