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How do we classify financial markets? If you want to buy some IPO shares, does it...

How do we classify financial markets? If you want to buy some IPO shares, does it occur on the primary market or on the secondary market?

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Answer #1

Financial markets can be classified into 4 types:

  • By Nature of claim which includes the bedt market and equity market
  • By Maturity of claim which includes the money market and the capital market
  • By timing of delivery which includes cash market and futures market.
  • Lastly by Organisational structure which includes the exchange traded market and the derivates market.

The primary market is where the securities are created like the company sells their stock for the first time wheras the secondary market is where the securities are traded.

Therefore an IPO comes under primary market because the corporation raise money by issuing securities which has been issued no where else.

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