PrimaryAndSecondaryMarkets

The first issue of a new security is called the 'primary market'. Once a security has been issued, the first set of investors may then trade it on, perhaps selling on to new investors. This is called 'secondary trading' and takes place in the 'secondary market.'

Investors who buy a security - perhaps in the primary market - and then keep hold of it without trading on are called 'buy and hold' investors.' In the case of a bond - a promise to pay back a certain amount at a given date, or in installments - a buy and hold investor may just keep the bond until it is 'redeemed.'

If all investors were buy-and-hold investors then there would be no need for a secondary market. Usually, though, investors will want to at least have an opportunity to sell-on a security. If the secondary market is illiquid - eg. there are few investors active in the secondary market, so demand is low - this may put off investors from investing in the primary market and dampen primary demand.