Differences between Primary and Secondary Market Transactions

Running head: FINANCIAL MARKETS AND INSTITUTES
Financial Markets and Institutes
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1FINANCIAL MARKETS AND INSTITUTES
Table of Contents
Answer to Question 1 (a):................................................................................................................2
Answer to Question 1 (b):................................................................................................................2
Answer to Question 2:.....................................................................................................................3
Answer to Question 3:.....................................................................................................................4
References:......................................................................................................................................5

2FINANCIAL MARKETS AND INSTITUTES
Answer to Question 1 (a):
The following are the significant differences between primary market and secondary
market financial transactions:
In case of primary market transactions, there is relation to the development of new
financial assets. For instance, these transactions might be in the form of an organisation
involved in issuance of new shares or there is involvement of the government by issuing
treasury bonds or raising new funds.
On the other hand, secondary market transactions are associated with the transfer and sale
of current financial assets. For instance, a shareholder might sell shares to another
investor and the former obtains value via transfer of ownership without raising any new
funds1.
Answer to Question 1 (b):
Secondary markets are deemed to be beneficial for effective functioning of the primary
markets within the financial system owing to the following reasons:
With the help of secondary market transactions, it becomes possible to obtain funds for
developing businesses and this, in turn, would boost economic growth.
The investors would primary market securities, when they know there is presence of
liquid and deep secondary market where it is possible to sell the securities in future, if
necessary2.
1 Andrey, Leonidov, "Systemic Risks In Financial Markets" (2015) 2(1) Global Markets and Financial Engineering
2 Andrey,Leonidov, "Systemic Risks In Financial Markets" (2015) 2(1) Global Markets and Financial Engineering