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

When a company goes public, it sells new stocks and bonds for the first time. Usually, that sale takes the form of an initial public offering. Companies hire investment bankers to obtain buying commitments from large institutional investors for the IPO, often engaging in elaborate marketing strategies to secure these commitments.

The secondary markets include the New York Stock Exchange, the London Stock Exchange and the Nasdaq. Individual investors with little money are more likely to buy and sell on the secondary market, where anyone can trade, even if they only make small transactions.

Investors on the secondary market use brokers to make their purchases. Prices and demand fluctuate daily, but the prices paid by investors no longer stem directly from the IPO. Unless a company is buying back its shares, it has nothing to do with sales in the secondary market between two investors.

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