The secondary market and the primary market are two distinct segments within the financial market ecosystem, each serving different functions and involving different types of transactions.

The primary market is where newly issued securities, such as stocks and bonds, are bought and sold for the first time. In this market, companies raise capital by issuing securities directly to investors through processes like initial public offerings (IPOs) or bond offerings. Investors purchase these securities directly from the issuing company, and the proceeds from the sales go to the issuer.

Conversely, the secondary market is where previously issued securities are traded among investors. Once securities are sold in the primary market, they enter the secondary market, where they are bought and sold between investors without involvement from the issuing company. Stock exchanges and over-the-counter markets facilitate secondary market transactions.

One key difference between the two markets is their primary function: the primary market facilitates the issuance of new securities and capital formation for companies, while the secondary market provides liquidity for existing securities by enabling investors to buy and sell them among themselves. Additionally, pricing in the primary market is often determined through negotiations between the issuer and investors, whereas pricing in the secondary market is influenced by supply and demand dynamics among investors. Overall, while both markets are integral parts of the financial system, they serve distinct purposes in the lifecycle of securities.