Primary market: definition, types and examples

Primary markets are where issuers sell securities to investors for the first time. Although not widely accessible, they impact the price of stocks and bonds, so it’s important to understand how they work. Read on to find out more.

What is the primary market for stocks?

The primary market for stocks is the source of newly listed securities. It’s where companies and governments attempt to gain financing through equity and debt.

Examples of securities sold on the primary market include common and preferred stock, corporate bonds and government bonds.

The sale occurs between an investor and the issuer, usually with an investment bank working as an intermediary – known as an underwriter. The issues are highly regulated by bodies such as the Financial Conduct Authority (FCA) in the UK, and the Securities and Exchange Commission (SEC) in the US.

In theory, primary markets are the first opportunity the public has to buy an asset – but for the most part, the sales are only available to institutional investors. Once the initial sale is complete, investors can sell the asset on the secondary market to retail clients.

Types of primary market issues

There are several different types of primary market equity issues, including:

Initial public offering (IPO) – this is when a company sells shares of its stock for the first time. It’s also known as ‘going public’ as the process turns a private company into a publicly traded one. Its shares will then start trading on whichever stock exchange it chooses to list on
Rights issue – this action permits companies to raise further equity on the primary market, even if its shares are already trading on the secondary market. Existing investors will get offered a special price in proportion to their current shareholding
Private placement – which allows companies to sell shares to its larger investors, such as hedge funds and banks, without offering the issue to the public
Preferential allotment – gives companies the chance to offer shares to certain investors at a discounted price

Governments and companies can also issue debt on the primary market in the form of bonds.

New bonds are issued with interest (coupon) rates at the going base rate of a country. Bond issuances can significantly impact the price of older bonds, as their price can deteriorate if the newer bonds come with a higher interest rate.

Difference between primary and secondary market

The main difference between a primary and secondary market is who is offering the assets for sale. In the primary market, transactions occur between an issuer and an investor, but in the secondary market, transactions take place between two investors.

When discussing financial markets, it’s largely this segment, in which assets trade openly. It’s made up of stock exchanges, commodity exchanges and so on.

StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Please ensure you fully understand the risks involved by reading our full risk warning.

FOREX.com is a trading name of StoneX Europe Limited, and FOREX.com/ie is a domain operated by StoneX Europe Ltd, a member of StoneX Group Inc. StoneX Europe Ltd, is a Cyprus Investment Firm (CIF) company registered to the Department of Registrar of Companies and Official Receiver with a Registration Number HE409708, and authorized and regulated by the Cyprus Securities & Exchange Commission (CySEC) under license number 400/21. StoneX Europe is a Member of the Investor Compensation Fund (ICF) and has its registered address at Nikokreontos 2, 5th Floor, 1066 Nicosia, Cyprus.

StoneX Europe Limited is registered with the German Federal Financial Supervisory Authority (BaFin). BaFin registration ID: 10160255

FOREX.com is a trademark of StoneX Europe Ltd, a member of StoneX Group Inc.

The statistical data and the awards received refer to the Global FOREX.com brand.

This website uses cookies to provide you with the very best experience and to know you better. By visiting our website with your browser set to allow cookies, you consent to our use of cookies as described in our Privacy Policy.

Through passporting, StoneX Europe is allowed to provide its services and products on a cross-border basis to the following European Economic Area ("EEA") states: Austria, Bulgaria, Croatia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden.

Additionally, StoneX Europe Ltd is allowed to provide Investment and Ancillary Services to the following non-EU jurisdiction: Switzerland.

StoneX Europe Ltd products, services and information are not intended for residents other than the ones stated above.

Tied Agent Information: KQ Markets Europe Ltd with Company No. HE427857.
Address: Athalassas 62, Mezzanine, Strovolos, Nicosia Cyprus.
Services Provided: Reception and Transmission of Orders.
Commencement Date: 06/12/2022
Website: KQ Markets - CFD Trading | KQ Markets

We may pay inducements, such as commissions or fees, to affiliates or third-party introducers for referring clients to us. This is in line with regulatory guidelines and fully disclosed where applicable.

StoneX Europe Ltd may make third party material available on this website which may contain information included but not limited to the conditions of financial markets. The material is for information purposes only and does not contain, and should not be construed as containing, investment advice and/or investment recommendation and/or an investment research and/or an offer of or solicitation for any transactions in financial instruments; any decision to enter into a specific transaction shall be made by the client following an assessment by him/her of their situation. StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.