How is Primary market different from Secondary market?

 The primary market and secondary market are both parts of the capital market, but they serve different functions and operate differently. The main differences between the two are:

1. Purpose: The primary market is the market where new securities are issued for the first time. This is also known as the new issue market. The purpose of the primary market is to provide a means for companies to raise capital by issuing new stocks or bonds. On the other hand, the secondary market is where previously issued securities are bought and sold. This is also known as the stock exchange. The purpose of the secondary market is to provide a means for investors to buy and sell securities that they already own.

2. Participants: In the primary market, the participants are the issuing companies and the underwriters who help the companies to sell their securities. In the secondary market, the participants are the investors who buy and sell securities among themselves.

3. Prices: In the primary market, the price of securities is usually fixed at the time of issuance. This is known as the offer price or issue price. In the secondary market, the price of securities is determined by the supply and demand of the securities, and it can fluctuate depending on market conditions.

4. Volume: The volume of securities traded in the primary market is usually much larger than that traded in the secondary market. This is because the primary market involves the issuance of new securities, which can involve large amounts of capital. In the secondary market, the volume of securities traded depends on the demand for the securities.

5. Risks: The risks involved in the primary market are generally higher than those in the secondary market. This is because the securities in the primary market are new and untested, and there is no established market for them. In the secondary market, the risks are generally lower because there is an established market for the securities, and there is a history of trading and price movements.

In conclusion, the primary market and secondary market are both important parts of the capital market, but they serve different functions and operate differently. The primary market is where new securities are issued for the first time, while the secondary market is where previously issued securities are bought and sold. The two markets have different participants, prices, volumes, and risks.

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