Why Is the Secondary Market Important?

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The secondary market is important because that is where most stock trades are made between the individual buyers and sellers. Find out how the primary market deals with buying issues directly from a company with information from an investment manager in this free video on the stock market.

Part of the Video Series: Stocks & Mutual Fund Investments
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Video Transcript

So why are secondary markets important? Primarily because that's most of stock sales and most of stock purchases. The secondary market is everything that is done on the NASDAQ or NYSE exchange that all those trades that are done between individuals whether as a buyer or a seller, that's the secondary market. The primary market is the market where you're buying an IPO or you're buying the issue directly from the company when they first issue it, when they release it from their custody to the investment bank. So if you're in a secondary market, that's most everybody and if you're in a primary market, you're working with the issuer on the very first time that that equity is issued. So the importance of the secondary market's probably obvious now because that is the majority of all trading that is done.

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