What is the primary function of the secondary market?

The primary function of the secondary market is to facilitate the trading of existing securities among investors. This market allows shareholders to buy and sell shares that have already been issued, providing liquidity and enabling price discovery based on supply and demand dynamics. Investors are able to exchange securities without the need for the issuer or company to be involved in the process, which distinguishes the secondary market from the primary market where new securities are created and sold to investors for the first time.

In the secondary market, the focus is on the movement of securities already in circulation, allowing investors to realize profits or cut losses based on market conditions. This trading can take place on various exchanges or over-the-counter platforms. The importance of the secondary market lies in its role in providing an avenue for investors to manage their portfolios and for the overall market to function efficiently.