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.

RELATED TERMS
  1. Auction

    A system where potential buyers place competitive bids on assets ...
  2. Auction Market

    A market in which buyers enter competitive bids and sellers enter ...
  3. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs ...
  4. New Issue

    A reference to a security that has been registered, issued and ...
  5. Third Market

    Trading by non exchange-member brokers/dealers and institutional ...
  6. Public Offering Price - POP

    The price at which new issues of stock are offered to the public ...
Related Articles
  1. A Look At Primary And Secondary Markets
    Investing Basics

    A Look At Primary And Secondary Markets

  2. The 4 Ways To Buy And Sell Securities
    Options & Futures

    The 4 Ways To Buy And Sell Securities

  3. After an initial public offering, does ...
    Investing

    After an initial public offering, does ...

  4. IPO Basics Tutorial
    Retirement

    IPO Basics Tutorial

comments powered by Disqus
Hot Definitions
  1. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  2. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  3. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  4. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  5. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
  6. Earnings Before Interest After Taxes - EBIAT

    A financial measure that is an indicator of a company's operating performance. EBIAT, which is equivalent to after-tax EBIT ...
Trading Center