We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Finance

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What is the Secondary Market?

Mary McMahon
By
Updated: Feb 18, 2024
Views: 12,611
Share

The secondary market is a financial market in which investors buy and sell financial products directly from each other, rather than from the organizations and companies which issue financial instruments. The term “secondary market” or “aftermarket” is also used to refer more generally to any market in which people buy and sell goods which have been previously sold; a lively secondary market for books, for example, can be found in used bookstores all over the world.

By contrast, in a primary market, people buy products directly from the company which issues them. For example, when a company makes an initial stock offering to raise capital, investors can buy stock directly from the company. An investor could then turn around and resell the stock he or she purchased on the secondary market, pocketing the profits. Primary markets are used to raise capital, while secondary markets are used by investors to keep their assets as liquid as possible.

Secondary markets exist for a wide range of financial products, including stocks, bonds, and mortgages. One of the issues with secondary markets is that products can change hands so many times that it is difficult to track down the real owner. This can be an especially large problem with secondary markets for mortgages, which classically involve the sale of bulk packages of mortgages. Borrowers may not be sure about who owns their mortgages and where to direct payments, while mortgage holders may actually lose the physical proof that they own a mortgage note.

Stock exchanges are a well known example of a secondary market. At a stock exchange, investors trade directly with each other. Stock prices rise and fall in response to supply and demand. In this case, the value of the stocks being traded can directly influence the value of a company, but the company does not actually profit or lose from the sale of stocks. A manufacturer of widgets, for example, may find that its profits increase when it makes a new product announcement, leading to a rise in stock prices as investors grow more confident, but the sale of stocks on the secondary market does not raise capital for the manufacturer.

Primary and secondary markets are often closely related, and downturns in one can drive downturns in the other. Overall financial trends can also become problematic for either form of market, although primary and secondary markets may be influenced in different ways. The large size of such markets can also become a serious problem, as small financial issues can become magnified by panics which depress the overall value of the market.

Share
WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a WiseGeek researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Editors' Picks

Discussion Comments
Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

Learn more
Share
https://www.wise-geek.com/what-is-the-secondary-market.htm
Copy this link
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.