Question

State any five points of difference between 'Primary Market' and 'Secondary Market'.

Accepted Answer

Differences between ‘Primary Market’ and ‘ Secondary Market’: Primary Market Secondary Market 1. There is sale of securities by new companies or further new issues of securities by existing companies. 2. Securities are sold directly by the company to the investor. 3. Flow of fund is from saver to investors, i.e., directly promotes capital formation. 4. Only buying of securities takes place. 1. There is trading of existing securities only. 2. Ownership of existing securities is exchanged between investors. 3. Enhances liquidity of shares i.e., indirectly promotes capital formation 4. Both buying and selling of securities can take place. 5. Prices are determined and decided by the management of the company. 6. No fixed geographical location. 5. Prices are determined by demand and supply of the security. 6. Located at specified places.

Marking-scheme solution

More from Financial Markets

Primary Market	Secondary Market
1. There is sale of securities by new companies or further new issues of securities by existing companies. 2. Securities are sold directly by the company to the investor. 3. Flow of fund is from saver to investors, i.e., directly promotes capital formation. 4. Only buying of securities takes place.	1. There is trading of existing securities only. 2. Ownership of existing securities is exchanged between investors. 3. Enhances liquidity of shares i.e., indirectly promotes capital formation 4. Both buying and selling of securities can take place.
5. Prices are determined and decided by the management of the company. 6. No fixed geographical location.	5. Prices are determined by demand and supply of the security. 6. Located at specified places.