| PRIMARY AND SECONDARY MARKETS – A COMPARISION |
| PRIMARY MARKETS | SECONDARY MARKETS |
| (i) There is sale of securities by new companies or further (new issues of securities by existing companies to investors). | (i) There is trading of existing shares only. |
| (ii) Securities are sold by the company to the investor directly (or through an intermediary). | (ii) Ownership of existing securities is exchanged between investors. The company is not involved at all. |
| (iii) The flow of funds is from savers to investors, i.e. the primary market directly promotes capital formation. | (iii) Enhances encashability (liquidity) of shares, i.e. the secondary market indirectly promotes capital formation. |
| (iv) Only buying of securities takes place in the primary market, securities cannot be sold there. | (iv) Both the buying and the selling of securities can take place on the stock exchange. |
| (v) Prices are determined and decided by the management of the company. | (v) Prices are determined by forces of demand and supply. |
| (vi) There is no fixed geographical location. | (vi) Located at specified places. |
