CFA Level I · CFA Level I Exam · Equity Issuance and Trading
A company sells newly issued shares to investors for the first time through an underwriter. This transaction is best described as occurring in the:
The sale is a primary market transaction, because the issuer is selling newly created shares to investors for the first time and receives the proceeds. Secondary markets only involve resales of existing shares among investors, with no cash flowing to the issuer.
- Aprimary marketCorrect
- Bsecondary market
- Cthird market
Explanation
The primary market is where issuers sell new securities and receive the proceeds. Secondary markets involve trading of already issued securities between investors, and the issuer receives no proceeds. A third market is a secondary-market venue for exchange-listed shares traded over the counter.
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