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What is secondary trading?

What does secondary trading mean?
March 7, 2011


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Secondary trading means the process when investors buy securities from other investors, not from the issuing entities. Securities are first brought out through an Initial Public Offering by the issuers. A newly issued public offering is a primary market trade, investors purchase the securities directly from the underwriting investment bank.

If an investor wants to get his or her money back, it is possible to sell the security on the secondary market to other investors. In the secondary markets the securities are listed in stock exchanges before they are traded. The New York Stock Exchange is for example a secondary market.

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