Primary Market

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What is a 'Primary Market'

A primary market is a market that issues new securities on an exchange. Companies, governments and other groups obtain financing through debt or equity based securities. Primary markets are facilitated by underwriting groups, which consist of investment banks that will set a beginning price range for a given security and then oversee its sale directly to investors.

Also known as "new issue market" (NIM).

BREAKING DOWN 'Primary Market'

The primary markets are where investors can get first crack at a new security issuance. The issuing company or group receives cash proceeds from the sale, which is then used to fund operations or expand the business. Exchanges have varying levels of requirements which must be met before a security can be sold.

Once the initial sale is complete, further trading is said to conduct on the secondary market, which is where the bulk of exchange trading occurs each day. Primary markets can see increased volatility over secondary markets because it is difficult to accurately gauge investor demand for a new security until several days of trading have occurred.

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RELATED FAQS
  1. What's the difference between primary and secondary capital markets?

    Learn how in the primary capital market, securities are issued for the first time, while in the secondary market, investors ... Read Answer >>
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    Understand the difference between the primary market and the secondary market, and learn which investors are able to participate ... Read Answer >>
  3. What securities does the primary market deal with?

    Find out what kinds of securities are traded on the primary market, including who can participate in trading and the basics ... Read Answer >>
  4. What is the difference between a primary and secondary financial market?

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  5. When does a primary market become a secondary market?

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    Learn more about the primary marketplace -- home of initial public offerings -- and the major players that make buying and ... Read Answer >>
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