Primary, Secondary, Third and Forth Markets

The Primary Market
The primary market refers to the market where new issues (stocks and bonds not sold before) are sold. Investment bankers, acting as underwriters, bring new issues to the market through the primary market, either an Initial Public Offering (IPO) when the stock has not previously traded, or as a seasoned offering once the stock has traded but new shares are being added to the market.

Governments generally issue via auctions or private placements.
Government bonds
· at public auction. Federal Reserve guarantee average of accepted competitive bids.
Municipal bond
· issued by local government through:

• Competitional bidding, the underwriter with competitively determined fee
• Negotiated underwriting, the underwriter with negotiated fee
• Private placement, sell directly to investor without underwriter.

Corporates (stocks & bonds)
· hire investment banks to structure, price, distribute and underwrite new issues.

• Seasonal issues- firms already has shares trading in market;
• IPO-firms not currently trades in market through methods:
• Best efforts-investment bank do not take price risk, no price guarantee
• Competitive bids
• Negotiation

The Secondary,Markets
A secondary market is the market in which assets are traded after they have been sold through the primary market. In this market, investors trade directly with each other through an exchange.

U.S. government/municipal bonds - traded through banks, investment banks.
Treasuries - traded through treasury dealers.
Corporate bonds - through the OTC market, also takes place on the New York Stock Exchange and the American Stock Exchange.

Third market:
OTC trading in exchange-listed securities.

Fourth market:
Direct trading between investors without any intermediation.