Discuss why the primary market is dependent on the secondary market
Answers
The issued securities are traded in the secondary market offering liquidity to the stocks at a fair price. The new issue market provides a direct link between the prospective investors and the company. ... The health of the primary market depends on the secondary market and vice versa.
Primary market is dependent on secondary market. Secondary market provides the necessary liquidity for the issued securities. The prospective investors of secondary market applies in primary market based on its experiences in secondary market. By providing safety, regulation in secondary market, stock market attracts investors in primary market. The health and subscription in primary market depends upon how secondary market is performing. If secondary market is not doing good, then generally you will not see issues doing good in primary market either. Infact investors does not differentiate between primary and secondary market.