You may have often come across the word “secondary market” in financial articles and may have wondered what it means? In the world of financial markets, there are two types of markets- Primary market and secondary market. Simply put, the primary market refers to the market where securities are sold by the issuer during the initial offering, while in the secondary market, securities are traded by investors after the initial offering.

Before finding out about how the secondary market functions, it is important you know the know how of the primary market, click on the hyper link to read.

Now that you have got an idea about Primary markets, let us take a look at all the aspects of the secondary market and how it functions.

What is the Secondary Market?

Another name for Secondary Market is the aftermarket. As the name suggests, it is the market in which securities issued earlier i.e. in the primary market are bought and sold among investors.

In transactions done in the secondary market, the issuing company may not be involved unlike in the primary market.

The main difference between the primary and secondary market is that while in the former market investors can directly buy bonds directly from the issuer during their initial offering whereas in the latter, interested investors have to purchase the bonds from another investor willing to sell the same.

Market participants in the Secondary Market

1) Retail Investors

2) Advisory service providers and brokers

3) Non-banking financial institutions, mutual fund houses, banks etc

Now, that you know what the secondary market is, it is time we understood the differences between primary and secondary markets