Some operators of the capital markets participate in the issuance of a company’s security and/or in its following events, so they are involved in primary and secondary markets dynamics.
We can divide these operators in two typologies: the buy side and the sell side.
Let’s see their contribution in the two capital markets, along with the security’s issuance and trading.
In order to issue a new security in the primary market, the CFO or the treasurer of a corporation reaches out to a sell side operator, which is a financial intermediary (typically an investment bank).
The investment bank group involved in finding the buy side and executing the issuance is called the origination group: it proceeds after another team of the investment bank, the coverage team, has made some researches and analysis on the best type of security to place on the primary market.
The first buy side involved is a fund or an institutional investor.
Then, on the secondary markets, the security is sold to and bought by other buy side operators through an exchange or OTC: they make use of a sell side operator, which is typically the trading department of an investment bank or an electronic trading platform.
Then the investors keep on trading relying on brokers.
So, at the beginning, the only beneficiary is the company, which decides a fixed price.
Subsequently, in the secondary market tradings, all the investors are considered beneficiaries and they influence the price, which varies following the supply and demand.
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