What Is a Secondary Market?
A secondary market is a financial marketplace where previously issued securities and financial instruments such as stocks, bonds, options, futures, and derivatives are bought and sold. It is the opposite of a primary market which refers to the initial sale of securities or other investments by an issuer. The secondary market provides liquidity for investors who wish to sell their holdings before they mature. This allows them to realize gains on their investments without having to wait until maturity.
The secondary market also serves as an important source of capital for companies that need additional funds in order to expand operations or finance new projects. Companies can issue new shares through Initial Public Offerings (IPOs) or follow-on offerings in order to raise money from public investors. These transactions take place on exchanges like the New York Stock Exchange (NYSE), Nasdaq, London Stock Exchange (LSE), Tokyo Stock Exchange (TSE), etc., where buyers and sellers meet electronically or physically depending upon the exchange rules.