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Corporations and governments finance their activities by issuing stocks or bonds, which are purchased by the public directly from the issuing corporation or government entity. This is the primary market, which provides investors their first chance to purchase a new security. These sales are usually referred to as an initial public offering.  Initial demand is hard to predict, thus the initial sales price is often set too low, which makes the primary market very volatile.

The issuing financial institution has to go through an elaborate regulatory process in order to sell securities directly to the public.  These steps include filing detailed registration statements with the Securities and Exchange Commission, as well as state securities agencies, and then getting approval from those agencies. 

Once the securities are sold to the public through the primary market, any subsequent sales of the stocks or bonds take place in secondary markets such as the New York Stock Exchange or NASDAQ. 

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