In stock markets, what is the secondary market?

In stock markets, the secondary market is the market for existing securities.

When an investor buys shares on a stock exchange from another investor, the transaction takes place in the secondary market. The issuing company generally does not receive the money from that particular trade; ownership simply moves between market participants. Stock exchanges such as the New York Stock Exchange and Nasdaq provide organized venues for many of these transactions.

The secondary market follows the primary market, where companies or governments first sell newly issued securities to investors. An initial public offering, for example, is a primary-market transaction, while later trading of those listed shares is secondary-market activity.

Secondary-market trading helps establish market prices and gives investors liquidity. It also allows buyers and sellers to trade without waiting for the issuer to create a new security. The term can include regulated exchanges and over-the-counter markets, depending on the security and trading arrangement.