Secondary market

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As a secondary market (also circulation market ; English aftermarket ) is called in Finance a market on which the market players already in circulation contained financial instruments as commercial property purchase or resell . The primary market is a complementary term .

General

The financial markets are divided into money and capital markets . 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”). The original issuer is no longer involved in the secondary market unless it buys back the financial instruments there (e.g. through a buyback agreement or price maintenance ). On the secondary market, the supply from investors willing to sell meets the demand from investors willing to buy. The secondary market therefore covers every transaction beginning with the investor who purchased the first issue to the second buyer.

Commercial objects and price

The distinction between the two market segments first appeared in securities . The best developed and organized secondary market is therefore the stock exchange . The initial issue of shares , bonds and investment units takes place there on the primary market, while the - more common - resale takes place on the secondary market. It is therefore a stock market segment . Off-exchange trading on the secondary market is for underlying assets such as foreign exchange , varieties , precious metals , swaps , derivatives or other financial products instead. Commodities can be traded both on the stock exchange ( commodity exchange ) and over the counter on the primary and secondary market. The loan trade is a pure secondary market for loans ( English Transferable Loan Facilities ). This includes the transfer of syndicated shares in syndicated loans in international credit transactions . By contrast, the entire deposit business of credit institutions is part of the primary market. For investment banks , the secondary market is one of the main sources of income, alongside issues in the primary market (e.g. IPOs ) and mergers and acquisitions , i.e. mergers and company acquisitions .

The term secondary market has also already established itself for used goods, for example in the used car trade .

In the case of securities, the market price on the secondary market is the current yield , and on the primary market the issue yield . On the secondary market, price adjustments take place (for a given market volume ) so that the price and not the quantity is in the foreground. The amount is therefore a data parameter for the investor , the price an action parameter .

Information requirements

A functioning secondary market requires market transparency , some of which is created by the primary market. Issuers also have to meet the following information requirements on the secondary market :

The liability of the issuer in accordance with Sections 97 and 98 of the WpHG supplements the prospectus liability of the primary market for the secondary market ( Sections 33 ff. WpHG).

Functions

The secondary market offers investors the opportunity to resell financial products acquired on the primary market or to acquire them for the first time from investors. It ensures the corresponding market liquidity and eliminates a price-influencing market constriction , especially if the issuers of the financial products have taken on a redemption obligation. In terms of market volume , the secondary market is much larger than the primary market in securities. The trading opportunities on the secondary market are crucial for allocation and pricing on the primary market. Without a primary market, most financial products would have no secondary 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.

Individual evidence

  1. Stefan Richter, attribution of damages in the event of tortious liability for incorrect secondary market information , 2012, p. 10
  2. Markus Lenenbach, Capital Markets and Stock Exchange Law , 2002, p. 6
  3. ^ Günter Franke / Herbert Hax, Finanzwirtschaft des Unternehmens und Kapitalmarkt , 1999, p. 54
  4. Martin Ohlwein, Markets for Used Goods , 1999, p. 33
  5. Stefan Richter, attribution of damages in the event of tortious liability for incorrect secondary market information , 2012, p. 30
  6. Petra Buck-Heeb, Capital Markets Law , 2014, p. 121
  7. Stefan Richter, attribution of damages in the event of tortious liability for incorrect secondary market information , 2012, p. 12
  8. Pascal Gantenbein / Klaus Spremann, Zinsen, Anleihe, Kredite , 2014, p. 23
  9. Frederics Mishkin, Financial Markets, Institutions, and Money , 1995, p. 25
  10. Günter Franke / Herbert Hax, Finanzwirtschaft des Unternehmens und Kapitalmarkt , 1999, p. 53