Participants Capital Market

Primary vs Secondary Markets
In the primary market, there are four key players: corporations, institutions, investment banks, and public
accounting firms. Institutions invest capital in corporations that seek to expand and grow their businesses,
while corporations issue debt or equity to the institutions in return for their capital investment. Investment
banks are hired to match institutions and corporations based on their risk profile and investment style.
Finally, public accounting firms are responsible for the preparation, review, and auditing of financial
statements, tax work, consulting on accounting systems, M&A, and capital raising. Hence, public
accounting firms in the primary market not only assist corporations to raise capital but also help prepare,
review, and audit financial statements to ensure a fair representation of their financial performance.
While issuance of new bonds and new shares in exchange for capital occurs in the primary market, the
secondary market is for the sale and trade of previously issued bonds and shares. Buyers and sellers
engage in transactions on an exchange, while investment banks facilitate this process by providing equity
research coverage. This ability to freely sell and trade securities significantly increases the market’s
liquidity.
Four Key Players in the Primary Market
Below we outline the four key players and their roles in the capital markets: corporations, institutions, banks,
and public accounting.
1. Corporations
In the capital markets, corporations behave as operating businesses that require capital to grow and run
their operations. These corporations can vary in industry, size, and geographical location. Careers at
corporations that relate to the markets include corporate development, investor relations, and financial
planning and analysis (FP&A).
Examples of publicly traded corporations:
 Alphabet
 Amazon
 Apple
 Exxon
 Toyota
2. Institutions (“Buy Side” Fund Managers)

Institutions consist of fund managers, institutional investors, and retail investors. These investment
managers provide capital to corporations that need the money to grow and operate their businesses. In
return for their capital, corporations issue debt or equity to the institutions in the forms of bond and shares,
respectively. The exchange of capital and debt or equity completes the cycle of the two key players in the
capital markets.
3. Investment Banks (“Sell Side”)

Acting as an intermediary, investment banks are hired to facilitate deals between corporations and
institutions. The job of investment banks is to connect institutional investors with corporionss, based on risk
and return expectations, and investment styles. Careers in investment banking involve extensive financial
modeling and valuation analysis.
4. Public Accounting Firms

Depending on their divisions, public accounting firms can engage in multiple roles in the primary market.
These roles include financial reporting, auditing financial statements, taxes, consulting on accounting
systems, M&A advisory, and capital raising. Therefore, public accounting firms are usually hired by
corporations for their accounting and advisory services.
Key Players in the Secondary Market
Unlike the primary market, where there is an initial issuance of debt or equity in exchange for capital, the
secondary market allows for the sale and trade of issued bonds and shares. The secondary market allows
players to enter and exit securities easily, making the market liquid.
1. Buyers and Sellers

In the secondary market, fund managers or any investors who wish to purchase securities or debts will
have to locate a seller. Transactions are facilitated through a central marketplace, including a stock
exchange or Over The Counter (OTC).
2. Investment Banks
While investment banks facilitate the issuance of bonds and shares in the primary market, they expedite
the sales and trading of issued debts and equities between buyers and sellers in the secondary market.
Investment banks provide equity research coverage on each stock’s upside potential, downside risk, and
rationale to help buyers and sellers make a judgment. Moreover, investment banks sell and trade securities
on behalf of the clients to maximize their profits.

Participants Capital Market

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Participants Capital Market

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Primary vs Secondary Markets

Four Key Players in the Primary Market

Examples of publicly traded corporations:

2. Institutions (“Buy Side” Fund Managers)

3. Investment Banks (“Sell Side”)

4. Public Accounting Firms

Key Players in the Secondary Market

1. Buyers and Sellers

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