Primary and Secondary Market
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Primary and Secondary Markets
The Primary market deals in newly issued securities where the price is fixed by the underwriter. Secondary markets deal with already issued stocks / bonds.
The Primary market deals in newly issued securities where the price is fixed by the underwriter. Primary markets act as a source of new funds for the company issuing the stocks or bonds. Underwriters often reserve for themselves and their important clients a portion of the primary shares as part of their commission.
Secondary markets deal with already issued stocks and bonds and are the securities markets that we are most familiar with, including the New York Stock Exchange and the NASDAQ market. Security prices are determined in secondary markets by supply and demand. When securities are sold on the primary market, the main recipient of funds is the company issuing the securities. When a transaction is made on the secondary market, the party (usually an individual or mutual fund) that owns and sells a security receives the money.
In 1995, Netscape’s initial public offering (IPO) took place with great anticipation. Issued by a syndicate of underwriters lead by Morgan Stanley the IPO share price was first stated as $18. This is the price that shares would be sold in the primary market to preferred customers of the underwriting firms and the underwriters themselves. Due to heavy demand, the IPO price was raised to $25 by the day shares went public. When Netscape went public on the NASDAQ market, there was a delay of several hours after the opening bell as traders matched the volume of buyers and sellers who acquired shares in the primary market. Due to enormous demand, Netscape opened for trading at $54 a share, well above its stated IPO price. This is the price that average investors and many mutual funds would be able to buy their first shares of Netscape, yielding a good profit for primary shareholders who were selling. Primary and Secondary Markets – The
Primary and Secondary Markets
The Primary market deals in newly issued securities where the price is fixed by the underwriter. Secondary markets deal with already issued stocks / bonds.
The Primary market deals in newly issued securities where the price is fixed by the underwriter. Primary markets act as a source of new funds for the company issuing the stocks or bonds. Underwriters often reserve for themselves and their important clients a portion of the primary shares as part of their commission.
Secondary markets deal with already issued stocks and bonds and are the securities markets that we are most familiar with, including the New York Stock Exchange and the NASDAQ market. Security prices are determined in secondary markets by supply and demand. When securities are sold on the primary market, the main recipient of funds is the company issuing the securities. When a transaction is made on the secondary market, the party (usually an individual or mutual fund) that owns and sells a security receives the money.
In 1995, Netscape’s initial public offering (IPO) took place with great anticipation. Issued by a syndicate of underwriters lead by Morgan Stanley the IPO share price was first stated as $18. This is the price that shares would be sold in the primary market to preferred customers of the underwriting firms and the underwriters themselves. Due to heavy demand, the IPO price was raised to $25 by the day shares went public. When Netscape went public on the NASDAQ market, there was a delay of several hours after the opening bell as traders matched the volume of buyers and sellers who acquired shares in the primary market. Due to enormous demand, Netscape opened for trading at $54 a share, well above its stated IPO price. This is the price that average investors and many mutual funds would be able to buy their first shares of Netscape, yielding a good profit for primary shareholders who were selling. Primary and Secondary Markets – The