Secondary market guide gives us a clear idea about the execution of trade procedure in the secondary market. In the secondary market, an asset is purchased from one investor by another investor rather than from an issuing corporation.
Securities that have already been issued are traded in the secondary market. A perfect guide to the secondary market would provide instructions to the people on the nuances of trading stocks issued in the stock exchange. The volatility of the stock market results in a lot of risks for investors. Therefore, the services of an expert broker must be availed of.
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In the secondary market, transactions involve the transfer of securities from one investor to another. Therefore, the trade demands that the market should be highly transparent and liquid. He advantage of bonds, stocks or securitized loans is that, they can be easily bought and sold. Small portions of them can also be bought and sold according to the convenience of the holder. The same process holds true for ownership interests. Trading in the secondary market involves buying and selling of small portions of ownership interests and large loans.
The security is issued originally in the primary market. The secondary market is also known as aftermarket. In the secondary market, existing loans, bonds, stocks and assets are sold to investors either through intermediaries or directly. The debt instruments that are marketable are offered for resale to investors by dealers. There is also a secondary market for already existent mortgages. Mortgages originate obviously in the primary market.
The New York Stock Exchange is a brilliant example of a secondary market. Here the stock exchanges are parts of the stock exchange. A secondary market guide should clearly differentiate between primary and secondary markets. A security is issued directly from the company treasury as a primary market offering. It is also referred to as an IPO or Initial Public Offering. The investors buy IPOs from the primary market and then sell these securities in the secondary market when prices are favorable.
Last Updated on : 22 July 2016