What is the secondary market and how can you trade it?
Learn about the secondary market, including what it is and how to open your trade position.
What's on this page?
What is the secondary market?
The secondary market is where the majority of financial transactions for stocks, bonds and other markets take place. When most people think of the stock market, what they’re actually imagining is the secondary market – because that’s where things are being exchanged between buyers and sellers.
Primary market vs secondary market: what’s the difference?
The secondary market is often associated with the primary market, and it’s important to establish the differences between the two.
The primary market is where securities like stocks and shares are created, and it’s where they’ll initially be listed. Often, the primary market is saturated with institutional investors like banks, funds and other corporate entities.
The secondary market is where securities can be freely bought and sold between retail traders and investors – and it follows the primary market. Anyone with a trading account or investment account can take a position on a securities price movements on the secondary market – and as previously said, it’s where the majority of financial transactions take place.
How does the secondary market work?
The secondary market works by enabling people to buy and sell securities between themselves. For example, if you wanted to buy 100 Apple shares, you’d probably be buying them on the secondary market – even if you buy them through a broker.
Where this would be different, is if you were looking to invest in an initial public offering (IPO) – which means the stock might not be directly available to buy and sell yet. Instead, you’d need to register to receive a stock allocation on the primary market.
How can you trade on the secondary market?
In the context of our offering, trading means that you’ll be taking a speculative position on a market’s price – like a stock, index or forex pair rising or falling in value. For example, trading shares on the secondary market with us means that you’ll be speculating on a company’s share price without owning the shares directly.
Instead, you’ll be opening a position with CFDs, which are leveraged derivatives. You can buy or sell based on your prediction of the market movement.
- ‘Buying’ means that you’re taking a position on prices rising – known as going long
- ‘Selling’ means that you’re taking a position on prices falling – known as going short
The secondary market summed up
- The secondary market is where the majority of financial transactions take place
- The secondary market follows the primary market – which is where securities like stocks and shares are created
- Once the primary market has concluded and the asset is publicly listed, it can be freely bought by traders and investors on the secondary market
- Trading means that you’re speculating on prices rising or falling without taking direct ownership, by using derivatives like CFDs
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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