When comparing exchange-listed equity markets with Over-the-Counter (OTC) trading venues, which of the following statements correctly describe their structural and operational differences? (Select all that apply.)
- Exchange-listed markets operate primarily as centralized auction markets, whereas OTC markets function as decentralized, negotiated networks of dealers.Cevap
- BMarket participants in OTC venues act exclusively in an agency capacity charging commissions, while exchange specialists act strictly in a principal capacity.
- Securities traded in OTC venues generally include unlisted stocks and debt instruments that do not meet national exchange listing standards.Cevap
- DOTC market trades represent primary market transactions where issuers receive corporate proceeds, while exchange trades occur exclusively in the secondary market.
Cevap
The correct statements are that exchange-listed markets operate as centralized auction markets while OTC markets are decentralized negotiated dealer networks, and that OTC venues handle unlisted securities that do not meet national exchange listing standards.
Exchange-listed markets use centralized auction mechanisms where buyers and sellers bid and offer competitively. In contrast, OTC markets consist of geographically dispersed market makers connected electronically who negotiate trades directly as principal dealers. Furthermore, OTC markets accommodate unlisted stocks, corporate bonds, and municipal debt that are not listed on national exchanges.
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Secondary market trading venue structures: Auction vs. Negotiated dealer markets