The secondary market is a place to buy and sell securities that are already owned by an investor. When people think of the “stock market,” they’re usually thinking about the secondary market.
On the secondary market, investors re-sell and buy securities that were already issued. This includes securities traded on the major stock exchanges and ones traded over-the-counter, as well as a range of other, smaller markets.
Invest in the secondary market with Public.
Buy and sell OTC stocks, exchange-traded securities, and Treasury bills with Public.
The secondary market refers to any marketplace in which previously issued securities can be traded between investors. On the secondary market, investors purchase securities from one another rather than purchasing from the entity issuing it.
The category of secondary markets encompasses a wide array of markets dealing in various types of securities. The major stock exchanges, such the New York Stock Exchange, are predominately secondary markets. So are certain government-sponsored enterprises, bond markets, and over-the-counter (OTC) markets.
The primary and secondary markets encompass a wide range of institutions and trade types, and it’s important to understand what makes them different from one another.
The first time a security is issued, it’s usually sold on the primary market. If investors want to sell that security later on, they’ll sell it on the secondary market.
With Public you can invest in over-the-counter (OTC) and exchange-traded stocks on the secondary market.
When a security is first issued by companies or by another entity like the federal government, it is traded on the primary market. Primary-market sales take place between an investor and the financial institution underwriting the sale.
Some common examples of primary market transactions include:
There are significant differences in the characteristics, rules and regulations, types of investors, and securities traded on each market.
| Primary Market | Secondary Market |
|---|---|
| Securities are issued by a company or entity and are sold/given to investors | Securities that were issued on the primary market are traded between investors |
| Securities can only be sold once (for the first time) | Securities can be sold between investors as often as allowed |
| Prices are usually predetermined | Prices are driven by supply and demand |
| Most money raised from sales goes to the issuer | Investors gain or lose profit according to market conditions |
| Usually used by companies to generate equity capital | Generally used by companies to gauge shareholder confidence |
Invest in the secondary market with Public.
Buy and sell OTC stocks, exchange-traded securities, and Treasury bills with Public.
There are two main types of secondary markets:
In addition, mutual funds are traded on the secondary market, and the mortgage market includes a secondary market component.
Stocks can also move from the OTC market to the exchange market in a process known as uplisting.
In over-the-counter, or OTC, trading, securities are bought and sold through a decentralized, electronic broker-dealer network rather than a centralized exchange. Securities sold OTC include most bonds, as well as shares in companies that may not be ready to meet the relatively strict listing requirements for the major exchanges.
You automatically have access to 300+ OTC stocks to trade on Public once you create an account.
Major stock exchanges, such as NYSE (New York Stock Exchange) and Nasdaq, are secondary markets. This is because they are venues where investors buy and sell securities like stocks, ETFs, and bonds from one another after they have been issued through an IPO or FPO.
The primary mortgage market refers to financial institutions who act as lenders, writing mortgages for a borrower. Banks can then sell these mortgages on the secondary mortgage market, often to government-sponsored entities like Fannie Mae and Freddie Mac, who can then bundle them into mortgage-backed securities and resell them.
Secondary markets have several important benefits for investors, including valuation, security, and liquidity. Find out more:
Secondary markets, especially OTC markets, also come with risks to investors. It’s important to understand what these look like, including:
Public allows investors to trade on the secondary market using your funded investment account. With Public, you can buy and sell OTC stocks, major exchange-traded stocks, and Treasury bills.
If you’re looking to buy OTC stocks, or other major exchange-traded securities, here’s how you get started:
Search for the company’s ticker symbol on Public.
Enter the number of shares you want to purchase.
Note: Public doesn’t allow after-hours trading or fractional investments on OTC stocks.
You can purchase shares using a limit order or market order. Public-facilitated OTC trades default to limit order but can be adjusted to market order.
Note: Most OTC and exchange trades will settle within two business days of when they are purchased.
The secondary market encompasses a huge number of asset types and markets—from mortgage-backed-securities to ETFs to stocks and bonds. When you’re buying and selling stocks, including OTC securities, you’re most likely doing so on the secondary market.
Whether you’re planning to trade on a major exchange or over-the-counter, it’s essential to be aware of the risks when trading on the secondary market in order to make informed decisions.
Invest in the secondary market with Public.
Buy and sell OTC stocks, exchange-traded securities, and Treasury bills with Public.
On the primary market, issuers offer new securities to investors. On the secondary market, investors trade those previously issued securities between themselves.
There are two primary types of secondary markets: over-the-counter (OTC) markets and stock exchanges. You can buy both using your investment account on Public.
Secondary market trading often allows investors to buy and sell quickly, which can reduce losses. This can also be used by investors looking to increase liquidity.
Whereas prices in the primary market are usually set before securities are sold, on the secondary market, supply and demand set prices. When investor demand for a given stock rises, its price increases, and when investor demand falls, so do prices for the stock.
