Primary markets are the markets where new issues of stocks and BONDS are sold. CORPORATIONs selling such newly created issues receive the proceeds from primarymarket transactions. Thus, these are the markets within which new CAPITAL is raised. In primary markets, INVESTMENT BANKING firms (specialists in designing, marketing, and selling new issues) are the FINANCIAL INTERMEDIARIES between the issuers of new securities and their buyers. Secondary markets are exchanges where outstanding (previously issued) stocks and bonds are traded among investors. Corporations whose securities are being traded are not involved in these secondary-market transactions and consequently receive no funds from them. Nonetheless, secondary markets are vital to corporations, since it is in these markets that a firm’s MARKET VALUE is determined, and the exchanges also provide an important source of liquidity for stock and bond investors. Brokers and dealers are secondary-market intermediaries.
See also INITIAL PUBLIC OFFERING; STOCK MARKET, BOND MARKET.