Secondary market

economic-dictionary

The secondary market is the market for negotiation or transaction transactions, where any financial security, both fixed income and variable income, mixed or money market assets with the ability to be easily converted into money is traded.

Financial securities are issued on the primary market and then traded on the secondary market; they are only traded once on the primary market. Between the issuer and the first buyer. If this first buyer wants to sell the title to a third party, they have to go to the secondary market, where the titles already issued are traded for negotiation between market forces, that is, supply and demand.In this, the price varies according to many variables (economic and non-economic).

The secondary market is of vital importance since it allows savers and consumers to channel their interests and allow the exchange, mostly electronically, through a very powerful and accessible technological development for any investor just by pressing a key. .

Capital market

Secondary market types

In the secondary market there are two types of market within it: the organized market and the unorganized market, whose importance in recent years has been very great.

  • Organized Market: It is that regulated trading market where transactions are carried out through a clearinghouse, which ensures its proper functioning. This type of market is much more transparent than the unorganized market. An example of an organized market is the Futures market.
  • Unorganized market: Also called OTC (Over the Counter) market. In this market there is no regulation and it has proliferated a lot in recent years due to the fact that the costs are lower, the guarantees are smaller and the contracts are personalized allowing a greater leverage. In addition, the publicity that has been given to this market has been very strong and the figure of market makers or market makers has become fashionable. OTC markets are markets where the price is not very transparent and in many cases there are conflicts of interest. An example of this market is CFDs or the Forex market.

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Primary market

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