Stock market and the market

An exchange is an organized institution that is subject to specific legal regulations and enables trading of financial instruments between investors. The main task of the exchange is to provide the intermediation and infrastructure necessary to conduct transactions in a transparent and fair manner. The market, on the other hand, is a space where instruments are exchanged between investors, so it is a place where supply and demand meet, which is exactly what we are talking about at Webinar Universe.

The relationship between the stock market and the market is huge and can be seen on many levels. The exchange organizes the trading of securities, provides the necessary technical infrastructure and mechanisms that ensure the smooth operation of the market. It is also the stock market that plays the most important role in determining prices based on supply and demand, and stock quotes reflect the actual and current market value of various assets. In addition, the exchange controls compliance with regulations and standards by market participants, which translates into greater security and transparency of all transactions concluded on the exchange.

The financial market, and especially the capital market, is divided into two segments: the primary market and the secondary market. Investors are mainly interested in the secondary market, seeing it as an opportunity to earn and maximize profits. However, the primary market can be just as interesting, offering interesting investment opportunities.

Primary market, i.e. ...

The primary market is a less popular but extremely important segment of the capital market, where new securities are issued. This is where the life of financial instruments begins, thanks to which issuers raise capital directly from investors. Issues may include shares, bonds, and other financial instruments. We talk more about this on our training platform.

The main methods of issuance are public offerings, i.e. Initial Public Offerings (IPOs) and private offerings. An IPO is a situation in which a business entity (issuer) lists and introduces its securities to public trading on a stock exchange. Therefore, it concerns the first issue of new securities of the company. The main goal is to raise capital for the development of the company from various investors.

A private placement, on the other hand, is addressed to a strictly limited group of investors, but less than 149, thanks to which transactions are not subject to such stringent requirements, which of course does not mean the lack of any supervision. The relevant supervisory institutions check the compliance of the issuance procedure with the applicable regulations, which is to protect the interests of all parties to the transaction. Private placements are addressed primarily to significant investors, and the financial instruments offered are not available for public trading.

The most important feature of the primary market is the flow of funds that go directly to the issuer, which allows for the implementation of investment and development projects. In order to issue securities, a business entity uses financial intermediaries (usually investment banks) who help in preparing the offer and determining its terms.

The most important functions of the primary market are:

• the ability to raise capital for any purpose without the need to reach for loans;
• development of enterprises – capital is often used for further development of the company;
• activation of investors – stimulating the development of the capital market and increased involvement of primary capital.

Secondary market, i.e. ...

The secondary market is the actual stock exchange and focuses on trading in financial instruments after the offer has been sold on the primary market. In other words, after entering the stock exchange, i.e. after the first issue, the shares become traded on the secondary market – the owners of the shares can sell them on the stock exchange (secondary market) at their market price. This market segment is crucial in the mass trading of securities, providing liquidity to financial instruments and enabling investors to achieve their investment goals and maximize profits. The participants of the secondary market are individual investors, financial institutions, investment funds and other investment entities, but the main role in creating current prices is played by small, individual investors.

A very important issue on the secondary market is the flow of finances, which takes place between the seller (owner of the financial instrument) and the investor, who buys a certain amount of assets (e.g. shares) at a fixed, market price. This means that the funds from the sale of financial instruments on the secondary market do not go to the company – this happens only during the first issue of securities.

The key issue of the secondary market is also the liquidity of financial instruments, i.e. the ability to buy or sell securities at any time, which allows investors to better manage their risk and investment portfolio, enabling quick reactions to market changes. More information on this topic can be found on the Webinar Universe during online training. The main feature of the secondary market is huge volatility and high dynamics. The prices of financial instruments are influenced by many economic, political and company-specific factors (financial results, development plans, etc.), which can cause sudden and large changes in the value of individual instruments. Quotations on the market are constantly monitored and published, which not only allows you to track current changes, but also to create certain forecasts that make it easier to make informed investment decisions.

The most important functions of the aftermarket are:

• ensuring the liquidity of securities;
• price regulation by means of supply and demand;
• securing the interests of investors.

The division of the stock exchange into primary and secondary markets helps to better understand the mechanisms of the world of finance and investment. The primary market gives entrepreneurs the opportunity to raise capital for the company's operations and development, and the secondary market is a guarantee of liquidity and flexibility in securities trading. One of the main differences between the primary and secondary markets is the flow of funds (to the investor or to the issuer) and the price-setting mechanism: in the secondary market, value is created by demand, while in the primary market, the price is determined by IPOs. The primary and secondary markets are closely related to each other and together they create an effective and, above all, stable financial system, supporting economic development.