Securities Markets

Securities trade in different markets, and the IA should understand the differences between them:

  • Primary markets - this is where new issues are sold for the first time, such as IPOs (Initial Public Offerings).
    The tutorial, IPO Basics on IPOs examines how these securities are issued, as well as their potential benefits.

  • Secondary markets - the general term for all the markets where previously issued securities are traded:
    • First market - refers to the exchanges, such as the New York Stock Exchange, the American Stock Exchange, etc. Each exchange has specific requirements that a security must meet in order to be listed.

    • Second market - refers to securities that trade OTC (over the counter). The NASDAQ (National Association of Securities Dealers Automated Quotations) system is computerized and is much larger than any of the other exchanges.

    • Third market - refers to the OTC trading of NYSE-listed stocks, typically after the exchange is closed.

    • Fourth market - refers to the direct trading of large blocks of stocks between institutions, such as mutual funds, pension plans, etc. No brokers are involved; trading happens through an electronic network known as Instinet.
Trading Terminology

Related Articles
  1. Investing

    What's the Primary Market?

    The primary markets are where investors can get first crack at a new security issuance.
  2. Investing

    Comparing Primary And Secondary Capital Markets

    In the primary capital market, investors buy directly from the issuing company. In the secondary market, investors trade securities among themselves.
  3. Insights

    Getting to Know the Stock Exchanges

    Here are the answers to all the questions you have about stock exchanges but are too afraid to ask.
  4. Investing

    What's an Over-The-Counter Market?

    The over-the-counter market is a decentralized market in which unlisted securities trade.
  5. Insights

    What's an Exchange?

    An exchange is an organized marketplace where securities and other financial instruments are traded.
  6. Trading

    OTCBB and OTC Markets Group

    The majority of larger companies that trade publicly choose to list their stocks on one of the major exchanges - the NYSE or Nasdaq. However, many companies are unable to meet the financial or ...
  7. Insurance

    Brokerage Functions: Underwriting And Agency Roles

    Learning about these various activities can give insight into how securities are issued and traded.
  8. Investing

    What Is The Difference Between The Bond Market And The Stock Market?

    The differences between the two markets involve how each product is traded and the risks they present.
  9. Investing

    Explaining the Equity Market

    Equity market is a general term referring to a place were corporate stocks are sold.
  10. Trading

    The Global Electronic Stock Market

    The way trading is conducted is changing rapidly as exchanges turn toward automation.
Frequently Asked Questions
  1. Is There a Difference Between the Equity Market and the Stock Market?

    Equities and stocks refer to the same thing.
  2. What Happens to a Company's Stock When it Goes Bankrupt?

    Shareholders may be entitled to a portion of the liquidated assets in the wake of a bankrutpcy, but the stock will be worthless.
  3. What are Advantages and Disadvantages of Preference Shares?

    Preference shares have advantages and disadvantages for both investors and issuing companies.
  4. When am I eligible to receive Social Security benefits?

    Understand when you are eligible to begin collecting Social Security retirement benefits and how retiring at different ages ...
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