Which market involves trading existing securities?

The secondary market is where the trading of existing securities takes place. In this market, investors buy and sell securities that were previously issued in the primary market. The primary market is focused on new issues of securities, where companies raise capital by selling new stocks or bonds to investors for the first time. In contrast, the secondary market provides liquidity and allows investors to easily buy and sell those previously issued securities, thereby enabling efficient price discovery and investment diversification.

The derivatives market, while important in financial markets, deals primarily with contracts based on the value of underlying assets, not directly with existing securities themselves. The foreign exchange market is focused on trading currencies and facilitating transactions between different national currencies, rather than trading stocks or bonds. Thus, the secondary market is distinctly characterized by the trading of existing securities, making it the correct answer.