Examkin

Question

Difficulty: HardTypes of Markets and Trading Venues

An institutional fund manager executes a block trade of exchange-listed stock directly with another institutional investor via an Electronic Communication Network (ECN), completely bypassing broker-dealers and avoiding commission charges. Which secondary market trading venue is being utilized for this transaction?

  1. The Fourth MarketAnswer
  2. B
    The Primary Market
  3. C
    The Third Market
  4. D
    The National Securities Clearing Corporation

Answer

The Fourth Market is the trading venue used for direct institutional trades of exchange-listed securities executed via ECNs without broker-dealer intermediation.
The Fourth Market is defined as direct trading between institutional investors of exchange-listed securities using Electronic Communication Networks (ECNs) to bypass traditional broker-dealer intermediaries, thereby reducing transaction costs and commissions.

Step-by-Step Solution

1
Identify whether the transaction involves new capital creation or trading of existing shares.
The trade involves existing exchange-listed shares between investors, establishing it as a secondary market transaction.
Secondary markets host transactions between investors, whereas primary markets involve issuers selling newly created shares.
2
Analyze the participants and execution mechanism.
The transaction takes place directly between two institutional investors via an ECN without a broker-dealer intermediary.
Direct institutional trading bypassing broker-dealer intermediaries via ECN networks specifically defines Fourth Market execution.

Key Concept

Fourth Market Execution and Electronic Communication Networks (ECNs)
Estimated Time:1m 30s
Rate this question

Topics

Types of Markets and Trading Venues

More questions from this topic