What Is a Primary Market Transaction?

Primary market transactions involve purchasing new securities directly from issuers, according to MapsofWorld.com. Examples of such transactions include buying stocks and bonds directly from the company that issues such legal documents, as opposed to buying securities from a secondary market like a stockbroker.

Proceeds from the sales of securities in primary market transactions go directly to the issuers of the securities, according to Penn State University finance class resource. Owners of these assets can be companies, government agencies, banks or financial institutions. If a publicly traded company wants to raise capital, it can sell common stock on the primary market. Banks can sell their own mortgage loans to other companies to bring in more revenue.

In some states, retail investors must be registered with a brokerage firm to buy bonds on the primary market. When states sell bonds, the security is sold to an investor or broker. If other entities wish to invest in that security, a secondary market exists where private individuals buy the asset from the broker. The Oregon State Treasury explains that the bonds are then sold by brokerage firms to other buyers plus a commission rate. When new bonds are issued by government entities, these are considered primary market transactions at the initial list price of the securities, according to Electronic Municipal Market Access.