Which market feature primarily involves investors trading securities?

Which market feature primarily involves investors trading securities?

• A. Primary Market
• B. Secondary Market
• C. Future Market
• D. Equity Market

Answer: (B)

The secondary market is primarily where investors trade securities after they have initially been issued. In this market, existing securities are bought and sold among investors rather than being issued by corporations or governments for the first time. This allows investors to liquidate their holdings, purchase different securities, and participate in price discovery based on supply and demand dynamics for those securities. The primary market, on the other hand, is where new securities are created and offered to investors for the first time, typically through initial public offerings (IPOs). The future market involves trading contracts that commit to buying or selling assets at a future date, rather than trading the securities themselves. The equity market specifically refers to the market for company shares, but trading can occur in both the primary and secondary markets. Thus, while related, the equity and future markets do not alone encompass the broader concept of trading existing securities, which is the essence of the secondary market.

The secondary market is primarily where investors trade securities after they have initially been issued. In this market, existing securities are bought and sold among investors rather than being issued by corporations or governments for the first time. This allows investors to liquidate their holdings, purchase different securities, and participate in price discovery based on supply and demand dynamics for those securities.

The primary market, on the other hand, is where new securities are created and offered to investors for the first time, typically through initial public offerings (IPOs). The future market involves trading contracts that commit to buying or selling assets at a future date, rather than trading the securities themselves. The equity market specifically refers to the market for company shares, but trading can occur in both the primary and secondary markets. Thus, while related, the equity and future markets do not alone encompass the broader concept of trading existing securities, which is the essence of the secondary market.