Question

Distinguish between Primary Market and Secondary Market.

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

Answer 1

S. No	Basis of Distinction	Primary Market	Secondary Market
1.	Nature of Securities traded	New securities are issued by new and existing companies.	Existing securities are only purchased and sold.
2.	Involvement of the company	A company sells securities to investors directly or through an intermediary.	Investors exchange ownership of securities. The company is not involved at all.
3.	Capital formation	There is the flow of funds from savers to investors. It directly promotes capital formation.	The liquidity of securities is enhanced. It indirectly promotes capital formation.
4.	Buying and selling	Only buying of securities takes place.	Both buying and selling of securities takes place.
5.	Price determination	The company determines the price of securities to be issued.	Demand and supply of securities determine the price.
6.	Location	There is no fixed, geographical location of the market.	The market is located at specified places.