Which statement best describes the secondary market?

Which statement best describes the secondary market?

• A. The market where previously issued securities are traded among investors
• B. The market where securities are issued for the first time
• C. The market where only government bonds are traded
• D. The market where securities are delisted and redeemed

Answer: (A)

In the secondary market, trades occur between investors for securities that have already been issued. This is where liquidity and price discovery happen, since holders can buy or sell shares or bonds without the issuer issuing new shares or borrowing again. The issuer is not typically involved in these transactions; money changes hands between buyers and sellers, not the company itself. This contrasts with the primary market, where securities are sold for the first time to raise capital for the issuer. It’s also broader than a market limited to government bonds—secondary markets trade many types of securities issued by private companies, governments, and other entities. The idea of delisting and redemption isn’t a market where ongoing trading occurs; those actions involve the issuer and the exchange in specific events, not the ongoing trading activity that defines a market.

In the secondary market, trades occur between investors for securities that have already been issued. This is where liquidity and price discovery happen, since holders can buy or sell shares or bonds without the issuer issuing new shares or borrowing again. The issuer is not typically involved in these transactions; money changes hands between buyers and sellers, not the company itself.

This contrasts with the primary market, where securities are sold for the first time to raise capital for the issuer. It’s also broader than a market limited to government bonds—secondary markets trade many types of securities issued by private companies, governments, and other entities. The idea of delisting and redemption isn’t a market where ongoing trading occurs; those actions involve the issuer and the exchange in specific events, not the ongoing trading activity that defines a market.