Corporations issue new securities in the primary market, usually with the help of investment bankers. In the primary market, corporations receive the proceeds of stock sales. Thereafter, they are not involved in the trading of stocks. Owners of stocks trade them on a stock exchange in the secondary market.
In the secondary market, investors, not companies, earn the profits or bear the losses resulting from their trades. Stock exchanges encourage investment by providing this secondary market. By allowing investors to sell securities, exchanges increase the safety of investing.
Stock exchanges also encourage investment in other ways. They protect investors by upholding rules and regulations that ensure buyers will be treated fairly and receive exactly what they pay for. Exchanges also support state-of-the-art technology and business of brokering, which both help traders to buy and sell securities quickly and efficiently.