Summary
Understand the differences between primary and secondary markets with Vanguard. Learn how these markets impact your investments and trading strategies.
Trading on the primary and secondary markets
Points to know
- Vanguard Brokerage offers CDs and bonds in both primary and secondary markets.
- Buying CDs and bonds in the primary market means you're transacting with the issuer of the security.
- Buying or selling CDs and bonds in the secondary market means you're transacting with other market participants.
What are primary & secondary markets?
Primary market
When you buy a CD (certificate of deposit) or bond on the primary market, you're buying a security that's just been created, commonly referred to as a "new-issue." It's like buying a new car. You're the original owner.
Proceeds from your purchase go to the issuer of the security, such as a bank for CDs and corporation or government agency for bonds.
Secondary market
When you buy or sell a CD or bond on the secondary market, you're transacting with another market participant, not the issuing company or agency. It's like buying a used car.
If you're selling a security, you get the proceeds; if you're buying one, proceeds go to the seller.
Compare the features of primary & secondary markets
Here's a breakdown of the pros and cons of investing in each market.
Pros
- New-issue offerings from the government, agencies, municipalities, and corporations.
- Price for all investors disclosed up front.
- Stable and predictable investment income.
- No bid-ask spread.
- For CDs, simple interest; CDs not renewable at maturity.
Cons
- Market limited to currently available offerings.
- No price flexibility.
- For CDs, subject to market and interest rate risk if sold prior to maturity.
Pros
- Larger selection of CDs and bonds.
- Flexibility in timing and pricing trades.
- Stable and predictable investment income.
- Liquidity in buying and selling.
Cons
- Fluctuating prices based on prevailing interest rates, credit quality of the issuer, and general economic conditions.
- Largely an over-the-counter (OTC) market where prices aren't seen by all participants at the same time.
- Dependent on the broker-dealer network to get the best price.
- For CDs, subject to market and interest rate risk if sold prior to maturity.
Learn how Vanguard Brokerage works to get the best price for you
When trades settle in each market
Trades on either market settle through your settlement fund at different times, depending on the security.
| Primary market | Secondary market | |
| CDs | Usually 1 or 2 weeks depending on the issue from the bank | The next business day after the trade date |
| GNMAs | Typically around the end of the third week of the month (21st or 22nd) | The next business day after the trade date |
| Treasuries (bought at auction) | Typically 3 business days | The next business day after the trade date |
| Corporate bonds | A few days or a few weeks, depending on the issue | The next business day after the trade date |
| Agency bonds | As defined by the issuer | The next business day after the trade date |
| Municipal bonds | As defined by the issuer | The next business day after the trade date |
| Commissions & fees | Vanguard Brokerage acts as a principal only for new issues in corporate bonds and CDs. Vanguard Brokerage generally receives a fee concession from the underwriter. |
Vanguard Brokerage always acts as an agent in the secondary market, executing the trade at the price you've chosen and charging a commission. There is no markup or markdown. |
CDs
Primary market
Usually 1 or 2 weeks depending on the issue from the bank
Secondary market
The next business day after the trade date
GNMAs
Primary market
Typically around the end of the third week of the month (21st or 22nd)
Secondary market
The next business day after the trade date
Treasuries (bought at auction)
Primary market
Typically 3 business days
Secondary market
The next business day after the trade date
Corporate bonds
Primary market
A few days or a few weeks, depending on the issue
Secondary market
The next business day after the trade date
Agency bonds
Primary market
As defined by the issuer
Secondary market
The next business day after the trade date
Municipal bonds
Primary market
As defined by the issuer
Secondary market
The next business day after the trade date
Commissions & fees
Primary market
Vanguard Brokerage acts as a principal only for new issues in corporate bonds and CDs. Vanguard Brokerage generally receives a fee concession from the underwriter.
View our commission & fee schedules
Secondary market
Vanguard Brokerage always acts as an agent in the secondary market, executing the trade at the price you've chosen and charging a commission. There is no markup or markdown.
Explore professional advice
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Open or transfer accounts
All brokered CDs will fluctuate in value between purchase date and maturity date. The original face amount of the purchase is not guaranteed if the position is sold prior to maturity. CDs are subject to availability.
CDs are guaranteed (within limits) as to principal and interest by the Federal Deposit Insurance Corporation, which is an agency of the federal government.
Investments in bonds are subject to interest rate risk, which is the chance bond prices overall will decline because of rising interest rates; credit risk, which is the chance a bond issuer will fail to pay interest and principal in a timely manner or that negative perceptions of the issuer's ability to make such payments will cause the price of that bond to decline; and inflation risk, which is the possibility that increases in the cost of living will reduce or eliminate the returns on a particular investment.
All investing is subject to risk, including the possible loss of the money you invest.
Vanguard's advice services are provided by Vanguard Advisers, Inc. ("VAI"), a registered investment advisor, or by Vanguard National Trust Company ("VNTC"), a federally chartered, limited-purpose trust company.
The services provided to clients will vary based upon the service selected, including management, fees, eligibility, and access to an advisor. Find VAI's Form CRS and each program's advisory brochure here for an overview.
VAI and VNTC are subsidiaries of The Vanguard Group, Inc., and affiliates of Vanguard Marketing Corporation. Neither VAI, VNTC, nor its affiliates guarantee profits or protection from losses.