Secondary Market, also referred to as aftermarket is described as a financial market wherein the investors are geared towards buy and sell of financial products among each other directly instead of purchasing from the companies and organizations that issue financial products. Moreover, the term is used as well to refer on any market where people would buy and sell products that are already previously hold on sale. For example, books in the secondary market are usually found worldwide in used bookstores.
In contrast, primary market is described as buying products by the customers towards direct purchasing in a certain company that issues them. For instance, if a certain company would make initial stock opening to be able to increase capital, the investors can directly buy the stocks from the enterprise. A potential investor can opt to turn around the stock and resell it after purchasing the stock in the second market while gaining profits. Therefore, the primary markets are geared towards raising the capital on the other hand; the secondary markets are geared towards helping the investors in keeping their whole assets to be more liquid.
Secondary markets are established with a wide array of different financial products. This includes mortgages, stocks and bonds. One disadvantage of secondary markets is the fact that the products have been handed down from one owner to another that it is hard to identify who owned the product first. This issue is a huge problem for mortgages in secondary markets, which generally includes the bulk packages on sale of mortgages. The borrowers may tend to be confused on where to pay and who really owns their mortgages while holders of the mortgages might have the tendency of loosing physical proof proving that they are the owner of a mortgage.
Another popular example of secondary market is the stock exchanges. In the world of stock exchange the numerous investors are directly trading among each other. Stock prices on the other hand may tend to rise and fall due the changes in the supply and demand. This pictures the fact that the stock’s value traded directly will reflect the company’s value as well but generally the company doesn’t lose or profit from the stock’s sale. For instance, a merchant of widgets may increase its profit when a new device is introduced that will lead to an increase in the stock prices enabling the investors to feel confident with the growth but the stocks on sale involved in the secondary market will not raise any capital for the producer.
Primary markets and secondary markets are closely associated which means if a downturn occurs in the first variable, the other variable will be greatly affected and vice versa. Generally, financial trends affect in the two forms of market though primary market and secondary markets are both differently influenced in many ways. The huge size of these markets also reflects a serious problem in the business, as minute financial issues are easily magnified through panics which in turn reflects the entire value of the business market.