What is the difference between buying municipal securities in the primary market versus buying in the secondary market?
When an issuer sells a new issue, it is referred to as a primary market sale. In a new issue, all of the terms are set, including the price and interest rates, and the securities are sold to investors, with the issuer receiving the proceeds of the sale. The initial sales of commission are paid to the broker-dealers as an underwriters discount and are paid by the issuer form the proceeds. A retail investor who would like to participate in a New Issue should have an existing account at the time of the bond sale with, and purchase the securities through, a brokerage firm serving as one of the issuers’ underwriters or selling group members or an investment advisor, money manager, or bank trust department that will act on his/her behalf. A secondary market transaction does not involve the issuer but is a transaction between two parties – a buyer and a seller. Secondary market transaction involve a brokerage firm which acts either as a liaison between the two parties or as a buyer or seller
