What Is Secondary Market?
A sign for Wall Street and American flags in New York, U.S. A stock exchange, such as the NYSE, is an example of a secondary market. (Photographer: Michael Nagle/Bloomberg)

What Is Secondary Market?

This is a series of explainers to educate and inform new investors. In association with Dun & Bradstreet India as knowledge partner.

Secondary Market: Definition, Meaning & Basics

A secondary market is the market in which securities issued in the primary market are traded by market participants. It provides an exit route to the investors—they can sell securities in the secondary market that they had purchased earlier.

A stock exchange is an example of a secondary market. Additionally, many securities are traded on “over the counter” platforms as well. In this kind of trade, two or more parties trade and settle a transaction among themselves.

The significance of the secondary market lies in the fact that it provides liquidity to securities issued in the primary market. Price discovery is another function performed by the secondary market, because of which it is possible to discover the value of a security from the quoted and traded transactions.

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