The Third Market
Chapters in this video
- 0:00 Meet Ivy: the institutional block-trade problem
- 1:13 Third market defined: listed securities traded OTC
- 2:30 Three reasons institutions choose the third market
- 3:37 Step-by-step mechanics: how the trade flows
- 4:19 Third market vs. fourth market: the dealer distinction
- 5:00 Exam trap: third market vs. regular OTC market
- 6:10 Exam trap: strategic choice, not exchange ineligibility
- 6:52 Rapid-fire exam recap
What this video covers
- Why the third market exists: lower transaction costs, reduced market impact, and extended trading hours for institutional block trades
- How exchange-listed securities retain their listing status even when traded off-exchange in the OTC market
- The required role of a broker-dealer (BD) intermediary to negotiate and facilitate third-market transactions
- The critical distinction between the third market (dealer involved) and the fourth market (no intermediary, direct institution-to-institution trading)
- Why the third market is exclusively for listed securities, and why treating any OTC trade as third market is a common exam trap
- Why the third market is a strategic choice, not a necessity due to exchange ineligibility
- How to identify a true third-market transaction versus a regular OTC market trade based solely on whether the security is exchange-listed
Read the full lesson, free
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