These are markets that deal with securities that have been issued for the first time. The money flows directly from transferor (saver of money) to transferee (investing person). They facilitate capital formation.
Economic Advantage of Primary Markets
1. Raising capital for business.
2. Mobilising savings
3. Government can raise capital through sale of Treasury bonds
4. Open market operation to effect monetary policy of the government i.e control of excess liquidity in the economy
5. It is a vehicle for direct foreign investment.