How is the "secondary market" defined?

The secondary market is defined as the market where previously issued securities are bought and sold. This encompasses all transactions involving securities that have already been issued by companies in the primary market, where those securities are first sold to investors. The distinguishing feature of the secondary market is that it facilitates the trading of existing stocks, bonds, and other securities, allowing investors to buy and sell these instruments without the issuing companies being involved in those transactions.

In contrast to the primary market, where new securities are created and sold to investors for the first time, the secondary market plays a vital role in providing liquidity and helping to determine the value of securities based on supply and demand dynamics. Recognizing this definition is crucial for understanding market mechanics, as it helps investors and participants navigate both markets effectively.