Investors purchase and sell shares from other investors on the secondary market (think of stock
exchanges).

For example, rather of buying Amazon stock directly from the company, you would buy it through
investors who already hold it.

In this arrangement, Amazon would not be engaged.

The New York Stock Exchange (NYSE), the NASDAQ, and the London Stock Exchange are all exa
mples of popular secondary markets (LSE).

Economic efficiency is boosted by the secondary market.

A seller who values the security less than the price and a buyer who values the security more tha
n the price are involved in each security sale.

Exchanges and OTC Market are two types of secondary markets

1. Interactions
Securities are traded in a central location with no direct touch between the seller and the buyer.
The New York Stock Exchange (NYSE) and the London Stock Exchange are two examples (LSE).
Securities are traded through a centralized exchange in an exchange-traded market (for example,
the NYSE and the LSE).
The exchange is used to buy and sell, and there is no direct contact between vendors and buyers
.
The exchange acts as a guarantor, therefore there is no counterparty risk.
Due to regulatory control, exchange-traded markets are considered a safe location for investors
to trade securities.
Securities traded on an exchange-traded market, on the other hand,have to pay a higher transacti
on fee

2. OTC (over-the-counter) markets
There is no central location where securities can be traded.
Securities are traded by market participants in a decentralized environment in the over-the-count
er market.
The market consists of all market players trading amongst themselves.
Because the over-the-counter market is decentralized, there is competition among suppliers to a
chieve a larger trading volume for their businesses.
The prices of the securities differ from one corporation to the next.
As a result, not every seller in an OTC market will give the greatest price.
OTC marketplaces are vulnerable to
counterparty risk since the parties trading on the are dealing with each other.