Features of primary markets are:
- This
is the market for new long term equity capital. The primary market is the
market where the securities are sold for the first time. Therefore it is
also called the new issue market (NIM).
- In
a primary issue, the securities are issued by the company directly to
investors.
- The
company receives the money and issues new security certificates to the
investors.
- Primary
issues are used by companies for the purpose of setting up new business or
for expanding or modernizing the existing business.
- The
primary market performs the crucial function of facilitating capital
formation in the economy.
- The
new issue market does not include certain other sources of new long term
external finance, such as loans from financial institutions. Borrowers in
the new issue market may be raising capital for converting private capital
into public capital; this is known as "going public."
- The
financial assets sold can only be redeemed by the original holder.
