Abstract
- Primary market: first sale of an asset, money flows to the issuer
- Secondary market: resale between investors, issuer receives nothing
Defining Test
Ask: where does the money go?
- Primary: Investor → Issuer. New money raised by the company or government. Examples: IPO, bond issuance, VC funding rounds, new property from developer
- Secondary: Investor A → Investor B. Existing asset changes hands. Examples: stock exchange trading, resale property, used car market
Why It Matters
- Pricing: primary often at fixed price (face value), secondary moves with supply and demand
- Return: same bond at primary face value gives full advertised return, at secondary premium gives lower actual return (see Bond Yield Calculation)
- Liquidity: primary has short rare windows, secondary trades any business day (varies by asset)
Cross-Asset Examples
| Asset | Primary | Secondary |
|---|---|---|
| Public stock | IPO, rights issue | SGX, NYSE daily trading |
| Private stock | VC rounds (A/B/C) | Forge, EquityZen |
| Bonds | New issuance, T-bill auction | SGX bond listings, broker market |
| REITs | IPO, placement | Stock exchange |
| Real estate | Off-the-plan, new launch | Resale market |
| Cars | Dealership new | Used car market |
Practical Implication
- Buying a bond at IPO at face value: actual return matches advertised coupon
- Buying same bond later above face value: actual return drops below coupon
- Always ask before any purchase: am I paying primary face price or secondary premium?