State any four differences between Primary market and Secondary Market.

Following are some differences between Primary market and Secondary Market:

Primary Markets:

  1. There is sale of securities by new companies or further (new issues of securities by existing companies to investors.
  2. Securities are sold by the company (to the investor directly for through an intermediary).
  3. The flow of funds is from savers to investors, i.e., the primary market directly promotes capital formation.
  4. Only buying of securities takes place in the primary market, securities cannot be sold there.
  5. Prices are determined and decided by the management of the company.
  6. There is no fixed geographical location.

Secondary Markets:

  1. There is trading of existing shares only.
  2. Ownership of existing securities is exchanged between investors. The company is not involved at all.
  3. Enhances encashability (liquidity) of shares, i.e., the secondary market indirectly promotes capital formation.
  4. Both the buying and the selling of securities can take place on the stock exchange.
  5. Prices are determined by forces of demand and supply.
  6. Located at specified places.

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