Sunday, April 19, 2009

providing risk-sharing,liquidity,and information services

risk-sharing,liquidity,and information services are provided in secondary markets , markets in which claims that have already been issued are sold by one investor to another. Suppose , for example , that you start a software company , Hitechco , which after a few years is growing rapidly but is in need of new capital for expansion . if you sell shares in Hitchco,you are turning to primary market for new funds. Once Hitechco shares are issued, investors trade the shares in the secondary market. Note that as an owner of Hitechco , you do not receive any new funds when your company ’s shares are traded in secondary markets .
Most of news about events in financial markets is about secondary markets rather than primary ones. most primary market transaction involve sales of new debt or equity instruments to initial buyers and are conducted behind closed doors . the most widely reported secondary markets are those for already issued equities, such as the new york , American, and Tokyo stock Exchanges. Even larger volumes of secondary market transactions take place in the bond market, where U.S. government and corporate debt instruments are traded .

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