primary market

The primary market is the financial market for the initial issue and placement of securities. Unlike in the secondary market, no organized stock exchanges are necessary. An organization that need funds contacts their investment banker who typically assembles a syndicate of securities dealers that will sell the new stock issue. Securities dealers see this as the wholesale part of their business. This process of selling the new stock issues to prospective investors in the primary market is called underwriting. The securites that they sell are called initial public offerings (IPOs). Dealers usually earn a commission that is built into the price of the security offering, that is, it is not apparent unless you read the prospectus in detail. This is contrasted with the retail part of the business, which is acting as an intermediary between buyers and sellers of securities in the secondary market.

Primary Market

See also