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Question : 4
Total: 8
Differentiate between 'Primary Market' and 'Secondary Market' on any five basis.
Solution:
The difference between 'Primary Market' and 'Secondary Market' are as follows:
| Basis of Difference | Primary Market | Secondary Market |
|---|---|---|
| Securities Traded | Primary market deals solely in the sale and purchase of newly issued securities. | Secondary market deals in the sale and purchase of already existing securities. |
| Securities Issued | Securities are directly issued by the companies. | Securities are transferred between the investors only. There is no involvement of a company here. |
| Price of Security | The prices of securities are determined by the company and its management. | The prices of securities are determined by the forces of demand and supply and other macro factor. |
| Geographical Area | There is no fixed place for a primary market. That is, all institutions and companies constitute a primary market. | Under a secondary market, trading takes place at specified locations and areas. |
| Purchase and Sale | In this market securities can only be purchased. | In this market securities can be purchased as well as sold. |
| Promotion of Capital Formation | Capital formation is directly promoted as funds from savers to investors are directly channelised to their most productive uses. | Capital formation is indirectly promoted as the liquidity of securities is augmented. |
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