Types-primary market and secondary market

Primary Capital Market:

Function: This is where new securities are created and issued for the first time.   Companies and governments raise capital by selling stocks and bonds directly to investors.   Key Activities: Initial Public Offerings (IPOs): When a private company offers its shares to the public for the first time.   Issuance of new bonds: When corporations or governments issue debt securities.   Participants: Issuing companies or governments.   Underwriters (investment banks) who help facilitate the issuance.   Institutional and some individual investors.   Key Characteristics: The issuing entity receives the funds from the sale of securities. Prices are often set through negotiations or by the underwriters. Subject to strict regulations.   Secondary Capital Market:

Function: This is where previously issued securities are traded among investors.   It provides liquidity, allowing investors to buy and sell existing securities.   Key Activities: Trading of stocks on stock exchanges (e.g., NYSE, Nasdaq).   Trading of bonds in the bond market. Participants: Individual investors. Institutional investors.   Brokers and dealers.   Key Characteristics: The issuing entity does not receive funds from transactions in the secondary market.   Prices are determined by supply and demand.   Provides liquidity and price discovery.   In essence:

The primary market is where new securities originate, providing the initial capital.   The secondary market is where those securities are traded afterward, providing liquidity and facilitating price discovery.   Both markets are essential for a healthy financial system. The primary market provides the initial capital, while the secondary market ensures that those investments can be easily traded.