HOW ARE SECURITIES BROUGHT TO THE PRIMARY AND SECONDARY MARKETS?
Securities reach the primary market when they are originally issued by entities like companies and governments, which issue them to raise funds. The investors or firms that purchase the securities on the primary market may then sell them on the secondary market, where they may in turn be bought and sold by many more investors. Let’s take as an example an initial public offering of common stock. A company that wants to raise funds by selling its equity works with an investment bank, which accepts the fiscal responsibility for converting the equity into shares of stock. The firms apply to the Securities and Exchange Commission (SEC) to have the stock registered and to create an offering prospectus, which gives details about the company, its business and finances, and the stock offering itself. With the offering prospectus, the investment bankers recruit a group of other banks or investment firms, called underwriters, which agree to purchase a portion of the stock from the lead investment
