The secondary market (also called "aftermarket") is the financial market for trading of securities that have already been issued in its initial private or public offering. Stock exchanges are examples of secondary markets.

History

Secondary markets have a long history, beginning perhaps with a flourishing trade in commercial bills of exchange in 12th and 13th century France. It was the French King Philip the Fair who created the profession of broker, or "couratier de change," in order to regularize this market.

Amsterdam's Bourse, which began operations in 1611, was the first true stock exchange, and this reflected the importance of Holland in world trade at that time.

Function

In the secondary market, securities are sold by and transferred from one investor to another. It is therefore important that the secondary market be highly liquid and transparent. The eligibility of stocks and bonds for trading in the secondary market is regulated through financial supervisory authorities and the rules of the market place in question, which could be a stock exchange.

Stock brokers see the secondary market as the retail part of their business. They are dealing with many clients and many relatively small transactions. This can be contrasted with the primary market in initial public offerings which can be seen as the wholesale side of their business.

See also

• Primary market