Which type of market allows for the trading of existing securities?

The secondary market is defined as the marketplace where previously issued securities are bought and sold. It serves a critical role in providing liquidity, allowing investors to sell their securities to other buyers rather than holding them until maturity or expiration. This trading occurs after the initial issuance of securities, which takes place in the primary market. The significance of the secondary market lies in its ability to offer current pricing information and facilitate the transfer of ownership of financial assets.

In contrast, the primary market is where new securities are created and sold for the first time, while the bond market specifically refers to the trading of debt securities. The capital market encompasses both the stock and bond markets, focusing on long-term funding, but does not specifically refer to the trading of existing securities. Thus, the secondary market is the correct answer as it specifically addresses the buying and selling of existing securities.