Secondary Liquidity

DEFINITION of 'Secondary Liquidity'

A form of liquidity that is part of an initial public offering when shares are distributed to both retail and institutional players. These secondary parties may then sell the security to other interested buyers, with an exchange typically acting as an intermediary.

Secondary holders, or liquidity providers, often hold fewer shares and provide less liquidity and/or share volume than the initial underwriter.

BREAKING DOWN 'Secondary Liquidity'

When a stock or bond is traded in the secondary market, it falls into a number of different hands, both retail and institutional. These holders often have fewer shares than their underwriter counterparts. Furthermore, while they offer investors a valuable source for shares, the liquidity providers are almost always less liquid then underwriters, which may retain a large portion of the initial offering for long-term investment.

RELATED TERMS
  1. Spot Secondary

    The sale of a previously issued security that does not require ...
  2. Impact Day

    The date on which a corporation makes a secondary offering of ...
  3. Secondary Offering

    1. The issuance of new stock for public sale from a company that ...
  4. Secondary Market

    A market where investors purchase securities or assets from other ...
  5. Lead Underwriter

    A investment bank or other financial outfit that has the primary ...
  6. Core Liquidity Provider

    An underwriter or a market maker that is a sizable holder of ...
Related Articles
  1. Investing

    What is the Secondary Market?

    The secondary market is where investors purchase securities or assets from other investors, rather than from the issuing companies themselves.
  2. Trading

    Comparing Primary And Secondary Capital Markets

    In the primary capital market, investors buy directly from the issuing company. In the secondary market, investors trade securities among themselves.
  3. Investing

    What's a Secondary Offering?

    A secondary offering is the issuance of new stock from a company that has already made its initial public offering.
  4. Investing

    Brokerage Functions: Underwriting And Agency Roles

    Learning about these various activities can give insight into how securities are issued and traded.
  5. Markets

    What is Liquidity Risk?

    Liquidity risk is the risk of being unable to sell an asset fast enough to avoid loss.
  6. Trading

    Understanding Liquidity Risk

    Make sure that your trades are safe by learning how to measure the liquidity risk.
  7. Investing

    Understanding Financial Liquidity

    Understanding how this measure works in the market can help keep your finances afloat.
  8. Investing

    A Look At Primary And Secondary Markets

    Knowing how the primary and secondary markets work is key to understanding how stocks trade.
  9. ETFs & Mutual Funds

    ETF Liquidity: Why It Matters

    Lower levels of liquidity in exchange-traded funds make it harder to trade them profitably.
  10. Markets

    Understanding Liquidity Risk

    Learn about the two types of liquidity risk: funding liquidity risk and market liquidity risk.
RELATED FAQS
  1. Why are the trades that occur in the secondary market important to a firm?

  2. What constitutes a secondary market?

    Find out what constitutes a secondary market, and learn why that term can be applied far more broadly than you might initially ... Read Answer >>
  3. Are secondary capital markets beneficial for society, or are there purely speculative?

    Learn why secondary bond markets are essential for both the capital market and economy. Explore the reasons they must be ... Read Answer >>
  4. Why do we need a secondary market?

    Find out why secondary markets play a crucial role in economic activity by promoting efficiency, safety, information and ... Read Answer >>
  5. What is the difference between an IPO and a seasoned issue?

    Learn how companies issue IPO securities when they first go public and seasoned issue shares if they sell more shares in ... Read Answer >>
  6. What is liquidity management?

    Take a look at the different definitions of liquidity, and find out how investors and businesses attempt to reduce exposure ... Read Answer >>
Hot Definitions
  1. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  2. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  3. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  4. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  5. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  6. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
Trading Center