Capital markets are places of transactional efficiency. It helps those who can supply capital and those in need of capital come to a common place. Those who have capital are retail and institutional investors, while those who seek capital are businesses, people and government.
Capital markets are made of primary and secondary markets. The stock market and the bond market are the common capital markets.
Capital markets are made up of suppliers and users of those supplies. It sell financial products like equities and debt securities. Primary market deal with new equity stock and bond issues, which are sold to investors. Primary market securities are considered as primary offerings or initial public offerings (IPOs).
Secondary markets are where existing securities are traded, capital markets are extremely important for the modern Economy since they help money to move between those who have them to those who can put them to productive use. The secondary market is overseen by a regulatory body like the Securities and Exchange Commission (SEC). Examples of secondary markets are the New York Stock Exchange (NSYE) and Nasdaq.
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Primary and secondary capital market are electronic platforms.
Their differences are mentioned below:
|Primary Capital Market||Secondary Capital Market|
|Investors buy securities directly from the issuing company||Existing or already-traded securities are traded between investors|
|Primary capital markets are important because when a company goes public, it sells its stocks and Bonds to big investors and industries such as hedge fund and Mutual Funds||Secondary capital markets are important because it creates liquidity. This helps investors gain the confidence to buy securities|