Primary market
Where a company sells newly issued securities and receives the cash. The only point at which dealing in its shares raises money for the business.
Where you will meet it
Primary market appears in 3 learning outcomes on the CFA syllabus. A few of them:
- Explain the secondary and primary markets for equity and the role each plays
“The primary market is where a company sells new shares and receives the money: an initial public offering the first time, a seasoned or follow-on offering afterwards, usually through underwriters who gauge demand and set the price.”
- Set out the segments of the bond market and the kinds of bond indexes
“New issues are sold in the primary market and existing bonds trade in the largely dealer-based secondary market.”
- Explain how ETF shares are created and redeemed and what role authorized participants play
“ETF shares are created and redeemed in the primary market by authorised participants, broker-dealers under contract with the sponsor.”
Practise it
Practise primary market until it is automatic: questions that explain every wrong option.
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