How is the primary market dependent on the secondary market?
Answers
Answer:
The primary market is where securities are created, while the secondary market is where those securities are traded by investors. In the primary market, companies sell new stocks and bonds to the public for the first time, such as with an initial public offering (IPO).
Explanation:
The primary market and the secondary market are the types of market in stock exchange. Both the primary market and the secondary market are interrelated with each other. First of all, let us see what is primary market and secondary market.
Primary market is the place where new shares or bonds are issued. Hence primary market is also called as new issue market. In primary market company sells the shares to investors to generate the fund. In primary market the trading is directly between investors and company. Investors can only buy shares, they cannot sell them. Here the price of share is decided by company and is fixed. Shares purchased in primary market are sold in secondary market. In primary market company can raise the fund by three types that is public issue, private placement or right issue.
To know more about public issue, private placement and right issue and also about Primary and secondary market watch below video.
Secondary market is also called as After market. Secondary market is the place where most of the trading takes place. The trading of shares and capital in secondary market takes place between the buyer and the seller, company is not involved in transactions. The price of share is decided by demand and supply of the shares and price keeps on fluctuating. In secondary market no new stocks are issued, only trading of stocks is there.
Hence in primary market we can only buy the shares. The shares purchased in primary market can be sold in secondary market only. So the primary market and secondary market are interrelated with each other.
Hope this will help you. ThankYou!
Answer:
secondary market provide the necessary liquidity for the issued security .... by providing safety regulations in second market , stock market attract investors in primary market