A secondary market is a marketplace where investors buy and sell securities they already own. This is different from a primary market, where securities are created and sold for the first time.
On the secondary market, the original issuer of the security does not participate in the transaction. The trade happens between investors. The most common secondary market is the stock exchange, where people trade stocks of publicly traded companies.
In the context of private equity or venture capital, the secondary market involves transactions in existing stakes in funds or private companies. These markets have developed as a way for early-stage investors to sell their holdings before a company's exit event, providing them with liquidity. It also allows new investors to acquire stakes in companies or funds they otherwise might not have access to.
