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The Secondary Market
A secondary market is a non-organized and unofficial market that usually runs parallel to an official market. The secondary market was created in North America in the year 1950 and is also known as an “over-the-counter” market (OTC). Usually, in these type of markets you can do operations that are more flexible and discrete than in the official markets.
The best known secondary market is NASDAQ (National Association of Security Dealers Automated Quotations). The NASDAQ functions in an electronic way and works out of the official stock exchange market, in base to a central computer situated in Connecticut. The financial intermediaries operate through personal computers that are connected to the central computer. Now-a-days the NASDAQ is the second most important market in the world after Wall Street.
In the present, there are secondary markets in most countries. They are characterized for having less requirements, which make the inclusion of companies that are not admitted to the official quotations more possible.
The advantages for quoting on the secondary market for small and medium companies are the following:
- it facilitates a major liquidity to securities of a company (this liquidity is given in case there is not any buyer, through the obligations that the counterpart societies have for maintaining money positions).
- To obtain an objective and public price for the company’s shares.
- To facilitate the enlargement of the number of shareholders.
- To increase the prestige of the society and to obtain free publicity.
- To accede to the stock exchange market with lower cost s than those of the
Official quotations
On the other hand , the secondary market makes it possible for investors to accede to the share capital of small and medium companies, insuring the liquidity of their investment.
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