Primary market

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As a primary market (including emissions market ; English primary market ) is called in Finance a market on which the investor first time a financial product drawing or acquire can. The secondary market is a complementary term .

General

The financial markets are divided into money (short-term investments) and capital markets (medium and long-term investments). In these markets there are, among other things, the primary and secondary market segments . While transactions take place on the primary market , the object of which is the initial acquisition of a financial instrument by an investor from an issuer (“issue market”), resale takes place on the secondary market (“circulation market”). On the primary market, supply from issuers meets demand from investors who are willing to buy.

Commercial objects and price

The distinction between the two market segments first appeared in securities . The best developed and organized primary market is therefore the stock exchange . The initial issue of shares , bonds and investment units takes place on the primary market, while the - more common - resale takes place on the secondary market. Both are therefore a stock market segment . OTC trading on the primary market takes place for underlyings such as swaps or derivatives . Commodities can be traded both on the stock exchange ( commodity exchange ) and over the counter on the primary and secondary market. The entire deposit business of the credit institutions belongs to the primary market. For investment banks , the primary market is one of the main sources of income for issues (e.g. IPOs ) and mergers and acquisitions , i.e. mergers and company acquisitions .

For new consumer goods , such as new cars , the term primary market has also already established itself in order to distinguish it from the used car trade on the secondary market.

In the case of securities, the market price on the primary market is the issue yield , and on the secondary market the current yield . Price adjustments take place on the primary market (for a given market volume ) so that the price and not the quantity is in the foreground. The quantity is therefore a data parameter for the issuer , the price an action parameter . The pricing on the primary market also makes an implicit judgment about the quality of corporate management.

Information requirements

A functioning primary market requires market transparency . This requires market data , which various laws oblige issuers to publish . Pricing on the primary market is to be protected by prospectus liability. Issuers have to fulfill the following information obligations on the primary market :

The prospectus liability for incorrect or incomplete essential information results from § 21 WpPG.

Functions

Without a primary market, most financial products would have no secondary market. The primary market is not only the allocation of capital , but in addition also the allocation of corporate control. The ability of an investor to sell a security at any time on the secondary market leads to a reduction in the cost of capital for the issuer on the primary market . In terms of market volume , the primary market is much smaller than the secondary market in securities. If you add the other trading objects, it is larger than the secondary market. The trading opportunities on the secondary market are crucial for allocation and pricing on the primary market. This means that there are strong interdependencies between the two market segments . The issuers on the primary market are therefore very interested in a functioning secondary market.

Others

Primary market is also the name of a private-law stock exchange segment on the Düsseldorf Stock Exchange for initial listings of securities.

Individual evidence

  1. ↑ Stefan Richter, attribution of damages in the event of tortious liability for incorrect secondary market information , 2012, p. 10
  2. ^ Günter Franke / Herbert Hax, Finanzwirtschaft des Unternehmens und Kapitalmarkt , 1999, p. 54
  3. ↑ Martin Ohlwein, Markets for Used Goods , 1999, p. 33
  4. ↑ Alexander Hellgardt, Kapitalmarktdeliktsrecht , 2008, p. 156
  5. ↑ Alexander Hellgardt, Kapitalmarktdeliktsrecht , 2008, p. 239 f.
  6. ↑ Pascal Gantenbein / Klaus Spremann, Zinsen, Anleihe, Kredite , 2014, p. 23
  7. ↑ Frederics Mishkin, Financial Markets, Institutions, and Money , 1995, p. 25
  8. ↑ Günter Franke / Herbert Hax, Finanzwirtschaft des Unternehmens und Kapitalmarkt , 1999, p. 53