How do MSRB rules distinguish between the primary and secondary municipal markets?

• A. Primary market is for trading existing securities; secondary market is for new issue offerings.
• B. Primary market is for institutional investors; secondary is for retail investors.
• C. Primary market involves new issue offerings and underwriting; secondary market involves trading existing municipal securities among investors.
• D. Primary market refers to over-the-counter trading; secondary to exchange trading.

Answer: (C)

The key idea is that the primary market covers the creation and sale of new municipal securities, while the secondary market covers trades of those securities after issuance. In the primary market, municipalities issue new bonds and underwriters price, structure, and distribute them to investors—the sale from issuer to investor is the focus. In the secondary market, investors trade securities that have already been issued, with prices driven by supply and demand among investors and facilitated by broker-dealers. That’s why the option describing new issue offerings and underwriting for the primary market and trading of existing securities among investors for the secondary market is the correct one. The other statements mix up what the markets involve (issuance versus trading, or investor type/venue distinctions) and don’t reflect the primary separation.