Question:
Give any three differences between Primary Market and Secondary Market.
Give any three differences between Primary Market and Secondary Market.
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Primary market means new securities, funds go to the company and the issuer fixes the price. Secondary market means existing securities, funds go to the seller and demand and supply set the price.
Updated On: Oct 26, 2026
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Solution and Explanation
Step 1: Meaning:
The primary market is the new issues market where companies sell securities for the first time. The secondary market is where existing securities are traded among investors.
Three differences follow.
Step 2: Difference 1: Nature of securities:
Primary market: new securities are issued for the first time.
Secondary market: already issued securities are bought and sold again.
Step 3: Difference 2: Flow of funds:
Primary market: the money paid by investors goes to the company. It helps in capital formation directly.
Secondary market: the money goes from the buyer to the selling investor. The company does not get it, so the effect on capital formation is indirect.
Step 4: Difference 3: Price determination:
Primary market: the price is fixed by the company with the help of merchant bankers.
Secondary market: the price is set by demand and supply of the securities.
Step 5: Extra point:
In the primary market there is no fixed place for the issue, while the secondary market works through stock exchanges. Three differences are enough to earn full marks.
Final Answer:
The primary market differs from the secondary market in the nature of securities, the flow of funds and the way the price is set.
The primary market is the new issues market where companies sell securities for the first time. The secondary market is where existing securities are traded among investors.
Three differences follow.
Step 2: Difference 1: Nature of securities:
Primary market: new securities are issued for the first time.
Secondary market: already issued securities are bought and sold again.
Step 3: Difference 2: Flow of funds:
Primary market: the money paid by investors goes to the company. It helps in capital formation directly.
Secondary market: the money goes from the buyer to the selling investor. The company does not get it, so the effect on capital formation is indirect.
Step 4: Difference 3: Price determination:
Primary market: the price is fixed by the company with the help of merchant bankers.
Secondary market: the price is set by demand and supply of the securities.
Step 5: Extra point:
In the primary market there is no fixed place for the issue, while the secondary market works through stock exchanges. Three differences are enough to earn full marks.
Final Answer:
The primary market differs from the secondary market in the nature of securities, the flow of funds and the way the price is set.
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