Primary Market

AAA

DEFINITION of 'Primary Market'

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).

INVESTOPEDIA EXPLAINS '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.

VIDEO

Loading the player...
RELATED TERMS
  1. Auction Market

    A market in which buyers enter competitive bids and sellers enter ...
  2. New Issue

    A reference to a security that has been registered, issued and ...
  3. Secondary Market

    A market where investors purchase securities or assets from other ...
  4. Public Offering Price - POP

    The price at which new issues of stock are offered to the public ...
  5. Third Market

    Trading by non exchange-member brokers/dealers and institutional ...
  6. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs ...
RELATED FAQS
  1. How can I buy shares in the primary market?

    If you want to buy shares in the primary market, you need to either be part of a syndicate or one of the lucky few whose ... Read Full Answer >>
  2. What is the difference between a primary and secondary financial market?

    Primary and second financial markets describe two different types of marketplaces where investors and traders buy and sell ... Read Full Answer >>
  3. Who trades in primary and secondary capital markets?

    Securities are sold on the capital market. Primary and secondary markets for securities trading have different purposes. ... Read Full Answer >>
  4. What's the difference between primary and secondary capital markets?

    The difference between the primary capital market and the secondary capital market is that in the primary market, investors ... Read Full Answer >>
  5. Are secondary capital markets beneficial for society, or are there purely speculative?

    Trading in a secondary market is beneficial to society in various ways. The greatest benefit is that investors in the secondary ... Read Full Answer >>
  6. After an initial public offering, does a company profit from increases in its share ...

    The short answer is "no". To understand why, recall that the stock market is actually comprised of two markets - a primary ... Read Full Answer >>
Related Articles
  1. Investing Basics

    What's the Primary Market?

    The primary markets are where investors can get first crack at a new security issuance.
  2. Investing Basics

    A Look At Primary And Secondary Markets

    Knowing how the primary and secondary markets work is key to understanding how stocks trade.
  3. Options & Futures

    The 4 Ways To Buy And Sell Securities

    Know the four main avenues of buying and selling investment instruments.
  4. Retirement

    IPO Basics Tutorial

    What's an IPO, and how did everybody get so rich off them during the dotcom boom? We give you the scoop.
  5. Professionals

    Why Investors Are Bailing on Bond ETFs

    Investors are fleeing bond ETFs. Should you follow the herd? Hint: It depends on the type of bond.
  6. Professionals

    Is a Bond Market Selloff Coming?

    A big investment management company is concerned about bond market conditions and allocating more capital to cash. Should you follow?
  7. Credit & Loans

    What is a Syndicated Loan?

    A syndicated loan is one that involves a group of lenders (called the syndicate) who pool their lending resources to make a loan.
  8. Investing Basics

    What is an Asset-Backed Security?

    An asset-backed security (ABS) is a debt security collateralized by a pool of assets.
  9. Stock Analysis

    Is Now the Time for Emerging Market Bonds?

    Higher yields and the potential for price appreciation await investors who take the plunge with emerging market bonds. Here's why.
  10. Investing

    Why Higher Rates Could Be Good News For Consumers

    While rates remain extraordinarily low by historical standards, in the last few months we have witnessed a modest change in the environment.

You May Also Like

Hot Definitions
  1. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  2. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  3. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  4. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  5. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
  6. International Monetary Fund - IMF

    An international organization created for the purpose of: 1. Promoting global monetary and exchange stability. 2. Facilitating ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!