Secondary Market

In investment, the term secondary market refers to the sale of assets by one investor to other investors.

A secondary market differs from a primary market in that assets are not sold by their issuers to investors, as is the case in a primary market. In a secondary market, assets are sold by one investor to another investor.

Because an asset may be bought and sold many times after its initial purchase from its creator, secondary markets are often much larger than primary markets.

The term is widely used to differentiate between shares sold by companies during public offerings and shares which are resold between investors through stock exchanges.

Secondary markets also exist for physical assets and commodities, as well as for bonds, warrants, options and many other types of contracts.

The can also be used in a more general sense to describe the seond-hand market for any type of asset.

Example of a primary market: A company manufactures a car and sells it to a buyer for 25,000 Swiss francs. That initial sale is part of the car’s primary market.

Example of a secondary market: Several years after buying the car, the buyer sells it for 13,000 francs to another buyer, who sells it to another buyer some years later for 5000 francs. When parts become difficult to find, the car’s owner parks it for several decades. A vintage car enthusiast eventually discovers the car and purchases it for 8000 francs. After restoring the car, they sell it to a vintage car dealer on auction for 15,000 francs. Several years later, the vintage car dealer sells the car to an enthusiast for 60,000 francs.

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