Question

Differentiate between ‘primary market’ and ‘secondary market’ on any five basis.

State any five points of difference between ‘primary market’ and ‘secondary market’.

Differentiate between ‘primary market’ and ‘secondary market’ on the basis of any three points.

Answer 1

Sr. No.	Basis of Difference	Primary Market	Secondary Market
1.	Securities Traded	The sale and purchase of newly issued securities take place in the primary market. There is the sale of securities by new companies or new issues of securities by existing companies to investors.	The sale and purchase of already issued securities take place in the secondary market. There is the trading of existing shares only that have already been floated in the primary market.
2.	Instruments	The company sells securities to the investor directly or through an intermediary.	Investors exchange ownership of existing securities. The company is not involved in the buying or selling process.
3.	Issued by	Securities are directly issued by companies.	Securities are among investors, and hence, there is no involve.
4.	Price	Prices are fixed by the company and its management. Prices are determined and decided by the management of the company after giving consideration to a lot of factors.	Prices are fixed by forces of demand and supply. Prices are determined by demand and supply for securities without management interference.
5.	Geographical Area	No fixed place for a primary market.	Fixed area and working hours under a secondary market.
6.	Purchase and Sale	Securities can only be purchased in the primary market. Only buying of securities takes place in the primary market, securities cannot be sold there.	Securities can be both purchased and sold in the secondary market. Both the buying and the selling of securities can take place on the stock exchange.
7.	Capital Formation	Directly promoted funds from savers to investors are directly channelized for productive purposes. The flow of funds is from savers to investors, i.e. the primary market directly promotes capital formation.	Indirectly promoted because the liquidity of securities is augmented. Enhances encashability (liquidity) of shares, i.e. the secondary market indirectly promotes capital formation.