Question

Explain the difference between (a) public offerings and private placements, (b) primary markets and secondary markets, (c) the money market and the capital market, and (d) organized security exchanges and over-the-counter markets.

Answer 1

a. A public offering is one where in the securities are offered to the general public through an IPO. A private placement is one wherein the securities are sold to accredited investors such as mutual funds, investment banks , private individuals etc.

b. Primary market is one where in the securities are offered for sale for the first time i.e. when the security is for a fresh issue. In a secondary market, securities that have already been issued in the primary market are bought and sold through trade activities.

c. Money market is where funds are raised through short term borrowings, lending , buying and selling. It is a liquid market where securities are easily marketable. Capital markets are where long term debt and equity stocks are traded for long term gains.

d. A organized security exchange where securities are exchanged between buyers and sellers in a controlled way through regulation ensuring safe , transparent transactions. Over the counter markets where securities bought and sold in a unorganized market through computers or phones.