The primary market is where securities are created. It's in this market that firms sell new stocks and bonds to the public for the first time. For our purposes, you can think of the primary market as the market where an initial public offering (IPO) takes place. Simply, an IPO occurs when a private company sells stocks to the public for the first time. In a primary market, companies, governments or public sector institutions can raise funds through bond issues and corporations can raise capital through the sale of new stocks through an initial public offering (IPO). This is often done through a dealer (security broker) or an investment bank.

• 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.
• 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 key functions of the primary market are;

• To facilitate capital growth by enabling individuals to convert savings into investments.
• To facilitates companies to issue new stocks to raise money directly from households for business expansion or to meet financial obligations.
• To provides a channel for the government to raise funds from the public to finance public sector projects. Unlike the secondary market, such as the stock market which trades listed shares between buyers and sellers, the primary market exists for the issuance of new securities by corporations and the government directly to investors.