What is the key difference between the primary and secondary securities markets? Why are the trades that occur on the secondary market important to a firm's management?

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Marisol Davila

Business

19 June, 23:18

What is the key difference between the primary and secondary securities markets? Why are the trades that occur on the secondary market important to a firm's management?

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Danna Weber · Answer 1

Explanation:The difference between the primary market and the secondary market is that in the primary market the owners of the company are the sellers and the investors are buyers. Investors can only buy stock in the primary market. If they want to sell the stock they have bought, it can be done only in the secondary market. The stock of any company is transacted in the primary market only once.

Lower transaction costs due to the high volume of transactions. Demand and supply economics in the market assist in price discovery. Secondary markets face heavy regulations from the government as they are a vital source of capital formation and liquidity for the companies and the investors.