|
Feature |
Primary
Market |
Secondary
Market |
|
Function |
The issuer (such as
a corporation or government) sells securities directly to investors. This
typically involves initial public offerings (IPOs) or new bond issues. |
The issuer is not directly
involved in the transaction. Instead, securities are bought and sold between
investors, with no new funds going to the issuer. |
|
Purpose |
Funds raised in the
primary market go directly to the issuer, which uses the capital for business
expansion, debt repayment, or other corporate purposes. |
Funds exchanged in
the secondary market go to the seller of the securities, not the issuing
company. It involves a transfer of ownership between investors. |
|
Participants |
Issuing companies,
underwriters, institutional investors |
Individual investors,
institutional investors, brokers, dealers. |
|
Regulation |
The primary market
has stringent regulatory requirements, including the filing of a prospectus,
regulatory approvals and disclosures to protect investors. The process is
overseen by regulatory bodies such as the Securities and Exchange Commission
(SEC) in the United States. |
While the secondary
market is also regulated to ensure fair trading practices and market integrity,
the regulatory burden on each individual transaction is lower compared to the
primary market. |
|
Accessibility |
Limited access for
individual investors |
More accessible to
most investors |
|
Costs |
Issuers incur costs
(fees) |
Investors incur
costs (commissions) |
|
Example |
Initial Public
Offerings (IPO), private placement |
Stock exchanges,
over-the-counter (OTC) markets, etc. |