A financial firm analyzes two distinct trading executions:
I. An over-the-counter (OTC) trade of a National Exchange-listed equity security between market makers.
II. A direct institutional trade of listed equity securities conducted proprietary-to-proprietary through an automated electronic system without market-maker intermediation.
Which of the following statements regarding these venue classifications are correct?
- Execution I is classified as a Third Market transaction.Cevap
- Execution II takes place in the Fourth Market via an Electronic Communications Network (ECN).Cevap
- CExecution I is considered a primary market transaction because it occurs off the physical exchange floor.
- DExecution II converts the executing venue into a depository entity performing DTC safekeeping functions.
Cevap
Execution I is classified as a Third Market transaction, and Execution II takes place in the Fourth Market via an Electronic Communications Network (ECN).
The Third Market refers specifically to over-the-counter (OTC) trading of securities that are listed on a primary exchange. The Fourth Market consists of direct trading between institutions without broker-dealers as intermediaries, usually conducted through Electronic Communications Networks (ECNs). Both statements correctly describe these venue structures.
Adım Adım Çözüm
Anahtar Kavram
Classification of Third and Fourth Markets and Trading Venues