Secondary market is the market for trading outstanding securities among the investors. Outstanding securities means are the securities were issued in the primary market to the investors on return of amount paid to the underwriter bank. In primary market money is paid to the investors but incase of secondary market one investors pays to others investors.
For Example – AT & T shares purchase in the new York stock exchange is the secondary market transaction as the shares were floated there after initial public offering which occurred in the primary market.
Secondary market also exist for the dealing of other assets, bonds and loans. Secondary market play a vital role in the capital market. More investors in the secondary market means more liquidity and more demands for the shares. The market performed well if more number of investors are willing to purchase the securities on the other hand if more investors are involved in selling in that case demand for the shares goes down because investors want to pull out there money from the market.Investors always wish to see more liquidity in the market so his or her money not tied up for the long period of time.