Secondary Market is the market where, unlike the primary market, an investor can buy a security directly from another investor in lieu of the issuer. It is also referred as “after market”. The securities initially are issued in the primary market, and then they enter into the secondary market.
All the securities are first created in the primary market and then, they enter into the secondary market. In the New York Stock Exchange, all the stocks belong to the secondary market.In other words, secondary market is a place where any type of used goods are available.
In the secondary market, shares are maneuvered from one investor to other, that is, one investor buys an asset from another investor instead of an issuing corporation. So, the secondary market should be liquid.
Example of Secondary Market:
In New York Stock Exchange, in the United States of America, all the securities belong to the secondary market.
Importance of Secondary Market:
Secondary Market has an important role to play behind the developments of an efficient capital market. Secondary market connects investors’ favoritism for liquidity with the capital users’ wish of using their capital for a longer period.
For example, in a traditional partnership, a partner can not access the other partner’s investment but only his or her investment in that partnership, even on an emergency basis. Then he or she can break the ownership of equity into parts and sell his or her respective proportion to another investor. This kind of trading is facilitated only by the secondary market.
|Secondary Market||SBA Secondary Market|
|Private Equity Secondary Market||MBA’s National Secondary Market Conference|
Last Updated: 23rd June 2015