A registered representative is training a junior analyst on capital market infrastructure and execution venues. When comparing transaction structures across the secondary market tiers, which of the following statements accurately describe these trading venues? (Select ALL correct options.)
- Trading of exchange-listed equities executed off the physical exchange floor directly between institutional investors via Electronic Communication Networks (ECNs) occurs in the Fourth Market.Cevap
- BTransactions occurring in the Second Market involve corporate issuers raising new capital by selling unlisted equity securities directly to accredited investors.
- Third Market trading involves exchange-listed securities being traded in the over-the-counter (OTC) market by off-exchange market makers and institutional investors.Cevap
- DWhen executing a client buy order in the Fourth Market, a broker-dealer acts as a principal dealer selling out of its own inventory to collect a mark-up.
Cevap
The statements describing Fourth Market trades as direct institutional ECN transactions and Third Market trades as OTC transactions in exchange-listed securities are correct.
The correct options are those describing the Fourth Market (direct institutional trading via ECNs without broker-dealers) and the Third Market (over-the-counter trading of exchange-listed securities). Both accurately distinguish secondary market execution venues.
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Classification of Secondary Market Tiers (First, Second, Third, and Fourth Markets)