What is a Primary Market?

What is a Primary Market?

The primary market is a financial marketplace where new securities, like stocks and shares, are first released to the public for purchases. Primary markets are the initial issuance of these securities where firms, governments and organizations engage in selling the securities directly to potential investors or hiring an underwriter to help them in the process of selling.

On the other hand, the secondary market is often times comprised of developed exchanges on which investors buy-sell securities they have already been issued into the secondary market. It should be noted that the original issuer is not involved in transactions, and this system aims at providing liquidity as well as price discovery.

Common examples of primary market activities include initial public offerings (IPOs), private placements, and rights offerings.

Different kinds of primary markets in TradFi and DeFi.

Primary markets have got a number of forms in both TradFi and DeFi markets. Whilst TradFi revolves around centrally controlled systems, DeFi is a decentralised financial network.

Traditional Finance (TradFi) Primary Markets.

Initial Public Offering (IPO): A company floats its shares on the stock market for the first time – and thus introduces the shares to the general stock market.

Private Placement: Shares are sold directly to specific investors, usually institutional or accredited individuals, without a public offering.

Rights Issue: Shareholders receive the option to purchase additional shares at a discounted price.

Preferred Allotment: Certain investors are given priority access to purchase shares before they become widely available.

Decentralized Finance (DeFi) Primary Markets

While DeFi does not strictly adhere to the concept of primary markets due to its lack of central authority, it does feature innovative approaches to token distribution and fundraising:

Token Sales: Project teams distribute tokens to early supporters, often through crowdfunding events or auctions.

Liquidity Pool Contributions: Users contribute assets to pools, earning rewards in return.

Yield Farming: Participants lock their assets into smart contracts to earn interest or fees generated by the underlying protocol.

Lending and Borrowing: some DeFi lending platforms provide users with additional tokens upon lending or borrowing cryptocurrencies. Specifically, Aave is known for offering interest bearing aTokens that are minted and burned upon deposit.

Furthermore, Term Structure offers tTokens to lenders, which can be bought or sold in their secondary market.

Alchemix offers future-yield-backed synthetic assets, which represent a flexible instant loan that repays itself over time.

Both TradFi and DeFi primary markets aim to connect issuers with investors, albeit through distinct structures and processes. The emergence of DeFi brings forth novel ideas and challenges, requiring collaboration between the two sectors to achieve widespread adoption and address regulatory concerns.

How Primary Markets Work On Term Structure.

The primary markets within the Term Structure protocol work like the core markets in which borrowers and lenders provide their quantities sought and corresponding interest rates through a mechanism known as batch auction. The base tokens required for borrowing are over collateralized while borrowers grant fixed interest rates and lenders provide lending tokens. The auction mechanism involves ordering matching based on time and a certain level of interest rates to help with matching. They create new tTokens that are exchangeable against lending assets in secondary markets and can be utilized in the repo markets to offer as a security for the borrowed base token for financing or hedging needs when borrowers gain borrowed tokens in the form of a loan.

How Lenders And Borrowers Benefit From Term Structure Primary Markets.

These demonstrates the benefits that both lenders and borrowers accrue from term structure primary markets:


Receive tTokens which entitles them to receive interest on a fixed coupon upon successful matches in the primary markets.

Possibility of higher yields, because of the auctions. This means that the interest rates may be better than expected.

Have the ability to select various base tokens as a form of collateral. Diversifying your portfolio and reducing risk.

Transactions are entirely free of gas fees, providing high transparency and security, as all interactions are processed on a privacy-preserving layer built on the Ethereum blockchain, zkTrue-up.


Can obtain loans supported by base tokens that are over-collateralized which helps decrease credit risk.

Secure predetermined interests rates that are at least as good as their expectations as a result of the competitive structure within the auction.

Improve the overall paradigm by allowing greater flexibility, variability and stability in the structure of fixed interest rate market.
Leverage the opportunity to borrow against various base tokens, expanding investment possibilities.

Primary dealers, who act as market makers in the secondary markets, also benefit from the Term Structure protocol by receiving incentives for supporting liquidity and facilitating trades among users. This collaboration fosters a healthy and active secondary market environment, benefiting both buyers and sellers of tTokens.

To get started on Term Structure primary markets visit: https://app.testnet.ts.finance/