Series 65

AAA

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
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