Trading Securities - Securities Terminology


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 Basics

    A Look At Primary And Secondary Markets

    Knowing how the primary and secondary markets work is key to understanding how stocks trade.
  2. Investing

    Trading Over the Counter

    OTC trades tend to be for smaller company stocks and debt securities. Debt securities such as bonds are generally traded by investment banks making markets for specific issues.
  3. Investing Basics

    What's the Primary Market?

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

    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.
  5. Options & Futures

    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!
  6. Investing Basics

    What is the Secondary Market?

    The secondary market is where investors purchase securities or assets from other investors, rather than from the issuing companies themselves.
  7. Investing Basics

    Why You Should Understand The Stock Market

    Even if you don't invest a cent in stocks, you should still understand how the stock market works. Find out why.
  8. Investing Basics

    What's an Exchange?

    An exchange is an organized marketplace where securities and other financial instruments are traded.
  9. Investing Basics

    Explaining the Equity Market

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

    How To Track Upcoming IPOs

    Interested in investing through IPOs? Here is the list of free sources for information on upcoming IPOs.
RELATED TERMS
  1. Securities Exchange Act Of 1934

    The Securities Exchange Act of 1934 was created to provide governance ...
  2. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context ...
  3. Exchange

    A marketplace in which securities, commodities, derivatives and ...
  4. Secondary Market

    A market where investors purchase securities or assets from other ...
  5. Primary Market

    A market that issues new securities on an exchange. Companies, ...
  6. General Public Distribution

    A type of primary market offering in which the securities being ...
RELATED FAQS
  1. What's the difference between primary and secondary capital markets?

    Learn how in the primary capital market, securities are issued for the first time, while in the secondary market, investors ... Read Answer >>
  2. What does it mean when my broker says that shares are for auction?

    An auction market is one in which stock buyers enter competitive bids and stock sellers enter competitive offers at the same ... Read Answer >>
  3. What is the difference between a primary and secondary financial market?

    Learn about primary and secondary financial markets, how investors use these markets and the difference between primary and ... Read Answer >>
  4. What is the average range for the price-to-earnings ratio in the electronics sector?

    Understand the difference between the primary market and the secondary market, and learn which investors are able to participate ... Read Answer >>
  5. What are the steps to get a company listed on the OTCBB?

    The over-the-counter bulletin board (OTCBB) is a regulated quotation service for over-the-counter (OTC) securities. The securities ... Read Answer >>
  6. When does a primary market become a secondary market?

    Understand the difference between the primary and secondary markets and why the secondary market is where investors go to ... Read Answer >>
Hot Definitions
  1. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage ...
  2. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  3. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  4. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  5. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  6. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
Trading Center