Following are some differences between Primary market and Secondary Market:
- There is sale of securities by new companies or further (new issues of securities by existing companies to investors.
- Securities are sold by the company (to the investor directly for through an intermediary).
- The flow of funds is from savers to investors, i.e., the primary market directly promotes capital formation.
- Only buying of securities takes place in the primary market, securities cannot be sold there.
- Prices are determined and decided by the management of the company.
- There is no fixed geographical location.
- There is trading of existing shares only.
- Ownership of existing securities is exchanged between investors. The company is not involved at all.
- Enhances encashability (liquidity) of shares, i.e., the secondary market indirectly promotes capital formation.
- Both the buying and the selling of securities can take place on the stock exchange.
- Prices are determined by forces of demand and supply.
- Located at specified places.