Key Concepts Across All Markets
Chapters in this video
- 0:00 Liquidity saves Ivy: secondary market vs primary market trap
- 1:03 Price discovery from every executed trade
- 2:29 Auction market vs negotiated market: NYSE and OTC
- 3:46 Meet the market maker and the bid-ask spread
- 5:37 NASDAQ historical roots vs current exchange status
- 6:16 Rapid-fire exam recap with Sam the student
What this video covers
- Why liquidity comes from the secondary market, not the primary market, and how the exam baits you on this distinction
- What price discovery is, and why more transparent markets produce more efficient price discovery than less transparent markets
- How auction markets use competitive bidding on exchanges like the New York Stock Exchange (NYSE), with the highest bid meeting the lowest ask
- How negotiated markets use dealer quotes in over-the-counter (OTC) markets and on Nasdaq's original dealer structure
- The memory aid for exam day: exchange equals listed equals auction; OTC equals unlisted equals negotiated
- What market makers do by maintaining a continuous two-sided market, always quoting both a bid and an ask to earn the spread
- Why the designated market maker (DMM) is the buyer for every seller and seller for every buyer, especially when no one else wants to trade
- Nasdaq's historical roots as an OTC dealer market versus its current status as a registered national securities exchange
Read the full lesson, free
This video's complete written lesson is free to read in the CertFuel app, no signup wall. The complete SIE course in the app is free too, including adaptive practice questions and spaced-repetition flashcards.