Primary market

The primary market is the part of the capital market that deals with issuing of new security finance securities. Companies, governments or public sector institutions can obtain funds through the sale of a new stock or bond issues through primary market. This is typically done through an investment bank or finance syndicate of securities dealers.

The process of selling new issues to investors is called underwriting. In the case of a new stock issue, this sale is an initial public offering (IPO). Dealers earn a commission that is built into the price of the security offering, though it can be found in the prospectus. Primary markets create long term instruments through which corporate entities borrow from capital market.

Once issued the securities typically trade on a secondary market such as a stock exchange, bond market or derivatives exchange.

Features

Features of primary markets are: