Use of Secondary Markets
Another important use of the international secondary market is the purchase and sale of loans. The secondary market also acts as a debt market, where loans can be sold by the mortgage banks that have originally transacted these mortgage loans. Investors may research the secondary market for loans that have been completed by Fannie Mae, Freddie Mac, and other types of mortgage loans.
The secondary market is also used as a vehicle to transfer securities or financial products from one investor to another. The use of a secondary market for these types of purchases may be more regulated than other types of over-the-counter purchases of financial instruments. The secondary market is used in order to reduce a certain degree of risk and is particularly liquid. The unique liquidity of a secondary market allows the purchase and sale of certain assets without excessive restraints. The investor's monies are not tied up for long periods of time and this type of liquidity allows the investor to use the monies if an emergency may arise. Pricing in this market may be dependent on certain economic conditions and other trading factors.
Secondary Market Strategy
There are certain other types of secondary markets. Private secondary markets are those that are available only to institutional investors or accredited investors. A private secondary market may trade certain unregistered and private company securities. Private equity or private equity secondaries are bought and sold by organisations that are interested in selling their company equity along with certain other rights to the company's equity.
Investors may be interested in other types of secondary market transactions. Finding alternative ways to invest may include certain types of valued assets, which may include purchasing or selling intellectual property. Intellectual property can include patents or rights to certain musical compositions, with the secondary market allowing the buyer to sell these intellectual property rights. Real estate transactions may be a part of this type of secondary market. Time-share ownerships may be bought and sold outside of the official markets for real estate assets. These time-share assets are similar to a secondary stock and bond. This type of financial transaction allows for a unique liquidity and certain types of speculation that would not otherwise be available. These financial instruments may have instant valuation.
Who Uses Secondary Markets?
This type of financial transaction is often used by certain speculators in the financial markets. The investor who needs to find an investment that is relatively liquid may be interested in the secondary market. Previously issued securities are bought and sold within this market and there is a relative degree of availability for most purchases and sales within a secondary market. The ease of liquidity is frequently noted as the reason to use a secondary market. The IPO alternative investment may be more time-consuming and may have a degree of uncertainly, which is often indicated since these stocks do not have a relative trading history.
The secondary market may be more of a specialised market. There are general markets that are part of a securities exchange network. These general markets are regulated by certain governing authorities in order to determine the value and quality of each security's transaction. A specialised secondary market may be one that trades only one type of asset or commodity. The investor who is interested in a particular type of trade may choose to follow a more unique route for investment.
Summary of Secondary Markets
Certain trades may be made through a general exchange. These investments may be part of a standard market economy with standard regulations for the price and size of each financial transaction. A secondary market may include certain private market transactions as well. This type of secondary market may allow the sale of certain private equity investments. There are secondary markets for mortgage loans that purchase and sell the mortgages for houses and commercial real estate, which may be bought and sold as groups of mortgage assets. Intellectual properties may be bought and sold on a secondary market. The investor who is looking to invest in certain creative entitlements may be interested in investing in patents. The rights to certain musical compositions may be bought and sold on a secondary market, while time-shares are other types of investment that may be purchased or sold on an alternative market.
Author Bio: Tim writes about financial news and information in plain English for Castle Harbour Securities. Financial news and information is not deemed as financial advice.