Types of Markets¶
Overview¶
Securities markets can be divided into primary and secondary markets:
Primary Markets are where new securities are first issued and sold. This typically occurs via initial public offerings (IPO) for stocks and primary offerings for bonds. The proceeds from the sale go to the issuer.
Secondary Markets are where investors trade existing securities without the involvement of the issuers. This market counts on the participation of organized stock exchanges, brokers, clearing houses, and institutional investors.
Over-the-Counter (OTC) trading occurs directly between parties, not through an exchange. They work as private networks of broker-dealers and financial institutions that exchange assets among them in a relatively organized fashion.