What distinguishes the secondary market from the primary market?

The distinction between the secondary market and the primary market primarily revolves around the trading of securities. The secondary market is specifically designated for the buying and selling of existing securities after they have been issued in the primary market. In this context, the primary market is where new securities are issued and sold for the first time, for instance, through Initial Public Offerings (IPOs).

The secondary market plays a crucial role in providing liquidity to investors, allowing them to trade previously issued securities. This enables investors to buy or sell shares among themselves, which can affect the market price of those securities based on supply and demand.

In contrast, the other options focus on aspects that do not correctly define the secondary market. New securities issuance pertains exclusively to the primary market, while trading high-risk securities does not define the secondary market, as it encompasses all types of securities. Additionally, the notion that the secondary market is only open to institutional investors is inaccurate, as it is accessible to both institutional and retail investors. Thus, the primary defining characteristic of the secondary market is its function in facilitating transactions of previously owned securities.