An institutional portfolio manager is reviewing execution mechanics across different trading venues to determine how to route equity trades. Which of the following statements correctly describe secondary market trading venues and their characteristics? (Select ALL that apply.)
- The Fourth Market consists of direct trading between institutional investors without the participation of a broker-dealer, often facilitated by Electronic Communication Networks (ECNs).Cevap
- The Third Market involves over-the-counter (OTC) trading of equity securities that are listed on a registered exchange such as the NYSE.Cevap
- CTransactions in which a corporation issues new shares to raise capital take place in the secondary OTC market.
- DWhen a firm acts as a broker in secondary market executions, it buys or sells securities for its own account as a principal and charges a mark-up or mark-down.
Cevap
The correct statements are that the Fourth Market consists of direct institution-to-institution trading (often via ECNs) without broker-dealers, and that the Third Market involves OTC trading of exchange-listed securities.
The statements defining the Fourth Market (direct institutional trading, frequently using ECNs without broker-dealers) and the Third Market (over-the-counter trading of exchange-listed stocks) are accurate capital market structure definitions.
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Classification of Trading Venues (First, Second, Third, and Fourth Markets) and Broker-Dealer Roles