Question

What is primary market? What is secondary market? “Because corporations do not actually raise any funds in secondary markets, they are less important to the economy than primary markets.” Is this right? What is your comment?

Answer 1

Primary markets are markets where companies initially sell stocks or bonds to the public to raise funds. Example, initial public offerings by companies to provide stocks to people first time to raise funds is primary market.

Secondary markets are where these stocks and bonds are traded. For example, after initial public offerings shares trade on share market like BSE.

Secondary markets are not economically less important than primary markets as they provide jobs and work to lot of people and thus very important for the economy to increase. Also, securities are traded in secondary markets which generate taxes for government and thus very important for economy.