The Secondary Market
Chapters in this video
- 0:00 Why the issuer gets paid zero in secondary trading
- 1:37 Liquidity and price discovery: the two market functions
- 2:31 Auction markets versus dealer markets
- 3:58 Exchange-listed versus OTC securities
- 5:17 Third market: listed stocks traded OTC
- 5:39 Fourth market: direct institutional trading via ECNs
- 6:27 Rapid-fire exam recap
What this video covers
- Why the issuer receives zero proceeds from secondary market trades, and why only the selling investor gets paid
- How liquidity and price discovery are the two core functions of the secondary market
- The difference between auction markets (bid-offer matching) and dealer markets (market maker inventory and bid-ask spread)
- Why Nasdaq started as an over-the-counter (OTC) dealer market but is now a registered national securities exchange
- How exchange-listed securities differ from OTC securities on listing standards, regulatory oversight, transparency, and liquidity
- What the third market is: exchange-listed securities traded OTC so institutions can execute large block trades without moving the exchange price
- What the fourth market is: direct institution-to-institution trading via electronic communication networks (ECN) with no broker-dealer involvement
Read the full lesson, free
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