Match each secondary market trading venue classification with its correct structural market definition and execution mechanism.
- Third MarketOver-the-counter (OTC) trading of exchange-listed equity securities executed off the exchange floor by market makers and broker-dealers.
- Fourth MarketDirect trading of exchange-listed securities between institutional investors through Electronic Communication Networks (ECNs) without broker-dealer intermediary participation.
- First MarketExecution of exchange-listed equity securities directly on the physical floor or central electronic order book of a registered national securities exchange.
- Second MarketTrading of unlisted equity securities, government bonds, and municipal securities in the over-the-counter (OTC) market through negotiated dealer networks.
Answer
Third Market matches with over-the-counter trading of exchange-listed stocks off the exchange floor; Fourth Market matches with direct institutional trading via ECNs without broker-dealers; First Market matches with exchange trading of listed stocks on registered exchange facilities; Second Market matches with over-the-counter trading of unlisted securities.
Each trading venue is categorized by whether the security is listed, whether the trade occurs on or off an exchange, and whether broker-dealer intermediaries are utilized. First Market covers exchange-listed shares traded on an exchange; Second Market covers unlisted shares/bonds traded OTC; Third Market covers exchange-listed shares traded OTC via broker-dealers; Fourth Market covers direct institution-to-institution trading of listed shares via ECNs without broker-dealers.
Step-by-Step Solution
Key Concept
Secondary Market Structure and Trading Venue Tiers