Secondary market

A secondary market is any market in which financial instruments or other assets are bought and sold among investors. Prices are set in a secondary market based on supply and demand. The bulk of all trading occurs in secondary markets. The only parties not involved in a secondary market are the initial issuers of financial instruments or other assets. For example, a sculptor creates and sells a statue to a collector. The collector then sells the statue at an art auction. Since the art auction occurs after the original sale of the statue, it is considered a secondary market. Any stock or commodities exchange is another example of a secondary market.

Secondary markets reduce investment risk, since an investor can readily dispose of an investment in a secondary market. The term is used because it encompasses all sales occurring after financial instruments or other assets were originally offered for sale.

Related Courses

CFO Guidebook 
Corporate Finance 
Investor Relations Guidebook