In secondary market, the securities issued in the primary market are bought and sold. Here, you can buy a share directly from a seller and the stock exchange or broker acts as an intermediary between two parties.
The secondary market is actually formed by another layer of investors who deal with primary market investor to buy and sell financial securities such as bonds, futures and stocks. These dealings happen in the proverbial stock exchange.
National Stock Exchange (NSE) and New York Stock Exchange (NYSE) are some popular stock exchanges. Majorly, the trade happens between investors without any involvement with the company that issued the securities in the primary market.
The secondary market is further divided into two kinds of market.
1. Auction Market
The auction market is a place where buyers and sellers convene at a place and announce the rate at which they are willing to sell or buy securities. They offer either the ‘bid’ or ‘ask’ prices, publicly. Since all buyers and sellers are convening at the same place, there is no need for investors to seek out profitable options. Everything is announced publicly and interested investors can make their choice easily.
2. Dealer Market
In a dealer market, none of the parties convene at a common location. Instead, buying and selling of securities happen through electronic networks which are usually fax machines, telephones or custom order-matching machines.