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Wednesday, 14 September 2016

Secondary Market

What is secondary market?
Ans: The secondary market is where investors buy and sell securities they already own. It is what most people typically think of as the "stock market", though stocks are also sold on the primary market when they are first issued. The national exchange, such as the Newyork Stock Exchange(NYSE).
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       Though stocks are one of the most commonly traded securities, there are also other types of secondary markets. For example, investment bank and corporate and individual investors buy and sell mutual funds and bonds on secondary markets. Entities such as Fannie Mae and Freddie Mae also purchase mortgages on a secondary market.
       
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                                            Transactions that occur on the secondary market are termed secondary simply because they are one step removed from the transaction that originally created the securities in question. For example, a financial institution writes a mortgage security. The bank can then sell it to Fannie Mae on the secondary market transaction.
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The secondary market , also called the after market, is the financial market in which previously issued financial instruments such as stock, bonds, options and futures are bought and sold. Another frequent usage of "Secondary market" is to refer to loans which are sold by a mortgage bank to investors, such as Fannie Mae and Freddie Mae.

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                                            The term "secondary market" is also used to refer to the market for any used goods or assets, or an alternative use for an exiting product or asset where the customer base is the second market (for example, corn has been traditionally used primarily for food production and feed-stock, but a "second" or "third" market has developed for use i ethanol production).
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This is the market where in the trading of securities is done. Secondary market consists of both equity as well as debt markets.
 
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                   Securities issued by a company for the first time are offered to the public in the primary market. Once the IPO is done and the stock is listed, they are traded in the secondary market. The main difference between the two is that in the primary market, an investor gets securities directly from the company though IPOs, while in the secondary market, one purchases securities from other investors willing to sell the same.
   
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                       Equity shares, bonds, preference shares, treasury bills, debentures, etc are some of the key products available in a secondary market. SEBI is the regulator of the same.
      
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