Secondary Markets on GetEquity
It’s another awesome week and we have been building awesome things to serve you better.
As always, here’s a round up of one of those things we have been excited about for a while now.
In 2021 we launched our secondary market trading feature on GetEquity and I am here to educate you in as simple words as possible.
What do you mean by Secondary market? Is there a Primary market?
Yes in Venture and Financing, Primary markets exist. In the simplest of definitions, the Primary market is where securities are created and sold to the public for the first time meaning it’s the first place shares and allocation of a company get viewed to investors looking for those shares.
In relation to GetEquity, the primary market is where you initially buy tokens in the startups listed as they go LIVE right up to the moment they close their round (closing a round means when a company is successful in fundraising their goal).
Every transaction that occurs at this point is done on the primary market which is typically a Buy transaction.
So where do secondary markets come in this case?
Secondary markets are where investors buy and sell securities already being owned by themselves or from other investors. It’s called secondary because these transactions have moved a step further from when the securities were initially sold.
In relation to GetEquity, the Secondary market is where you buy and sell tokens in companies whose rounds have closed currently.
We opened up the secondary market on GetEquity as a semi-liquidation system allowing you own and sell tokens of the companies you believe in to get liquidity or a seat at the table much faster.
If you own tokens in companies that have closed their rounds on GetEquity, you can now sell your tokens.
If you missed the company’s initial round, you now get a chance to purchase tokens from those willing to sell theirs.
For secondaries to occur, we make use of a tool called an Order book which is a record of transaction requests that occur, are logged and are matched in real-time, we call these order books the Market Order and Limit Order books.
Ok seriously break it down!
We make use of an order book where buy and sell requests are executed strictly as they come in.
Once there is a matching buy request at the price you are willing to sell, your sale would be successful. You can also place a buy request for tokens. If there is a matching sell request i.e someone who is willing to sell to you at the price you are willing to buy, your request will be successful.
There are two types of orders we introduced on the secondary market. Market orders and Limit orders.
Market Orders
A market order lets you buy or sell a token at the best currently available price on the system. This means you won’t be sure of the price your order will be executed until it’s done.
On a market order, you can only set the number of tokens you want to buy or sell. Your order will be fulfilled at the best available price. To help guide you on market orders, right on the app, you can see the last traded costs for buy and sell orders.
If company X was last traded at $10/X, your order would most likely be fulfilled at that price. Market orders are affected by supply and demand and based off of milestones of a companies progression.
Limit Orders
A limit order on the other hand allows you place a buy or sell order in advance with a set price you want . The exchange will only fill your order at the limit you have set for it. This is why it is called a limit order.
For buy orders, If I place a buy request in company X for $15 for a token, my request will be fulfilled at either $15 or lesser per token. That is, I have told the exchange that the most at which I want to buy a token is $15. That’s my limit on the amount I want to spend per token.
For sell orders, If I place a sell request in company X for $15 for a token, my request will be fulfilled at either $15 or greater per token. That is, I have told the exchange that the least at which I want to sell a token is $15. That’s my minimum price on how much I want to sell my token. As we Nigerians like to say, that’s my last price.
And that is how the secondary market works.
To get started on trading on the secondary market, all you need to do is head to your investor dashboard and click on the subheading “Secondary Market” to view all secondaries on the platform.
We do hope we have been able to convince you and not confuse you and we are happy to further educate you.
Got any questions on this, please send us an email at support[at]getequity[dot]io and the team will definitely get to you.
