Fourth Market

DEFINITION of 'Fourth Market'

The trading of exchange-listed securities between institutions on a private over-the-counter computer network, rather than over a recognized exchange such as the New York Stock Exchange (NYSE) or Nasdaq. Trades between institutions will often be made in large blocks and without a broker, allowing the institutions to avoid brokerage fees.

BREAKING DOWN 'Fourth Market'

For example, when a mutual fund and a pension fund enter into a large block trade with each other, this would generally occur in the fourth market and usually over an electronic communication network. By executing the transaction this way, both parties avoid brokerage and exchange transaction fees. They also avoid the possibility of distorting the market price or the volume traded on an exchange.

RELATED TERMS
  1. Block House

    A brokerage firm with the primary focus of locating potential ...
  2. Exchange Distribution

    A type of trade made on the floor of a securities exchange in ...
  3. Block

    A large amount of the same security bought or sold by institutional ...
  4. Block Trade

    An order or trade submitted for sale or purchase of a large quantity ...
  5. Institutional Investor

    A non-bank person or organization that trades securities in large ...
  6. Third Market

    Trading by non exchange-member brokers/dealers and institutional ...
Related Articles
  1. Trading

    What is the Difference Between Institutional Traders and Retail Traders?

    The differences between retail and institutional traders lie in the size of the trade, level of sophistication, and the speed of transactions.
  2. Investing

    The NYSE And Nasdaq: How They Work

    Learn some of the important differences in the way these exchanges operate and the securities that trade on them.
  3. Investing

    A Look At Primary And Secondary Markets

    Knowing how the primary and secondary markets work is key to understanding how stocks trade.
  4. Markets

    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.
  5. ETFs & Mutual Funds

    Understanding Block Trades

    A block trade is the sale or purchase of a large quantity of securities.
  6. Investing

    Institutional Investors And Fundamentals: What's The Link?

    Big-money sponsorship might make a company look good, but it's not always a reliable gauge of stock quality.
  7. Markets

    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!
  8. Managing Wealth

    Understanding Brokerage Fees

    Agents charge brokerage fees for facilitating transactions between buyers and sellers.
  9. Investing

    What’s The Difference Between Institutional and Non-Institutional Investors?

    Institutional investors are the big guys on the block. Non-institutional investors are everyone else.
  10. Investing

    What's an Exchange?

    An exchange is an organized marketplace where securities and other financial instruments are traded.
RELATED FAQS
  1. What's the difference between institutional and non-institutional investors?

    There are a number of differences between institutional investors and non-institutional investors. If you are considering ... Read Answer >>
  2. How does a company move from an OTC market to a major exchange?

    The over-the-counter market is not an actual exchange like the NYSE or Nasdaq. Instead, it is a network of companies that ... Read Answer >>
  3. What are the advantages and disadvantages of listing on the Nasdaq versus other stock ...

    Discover some of the primary advantages and disadvantages that exist for companies listed on the Nasdaq exchange rather than ... Read Answer >>
  4. The popular trading system "Instinet" is situated in which of the following markets ...

    Free info on financial certification exams including study guides, exam questions, and much more! Read Answer >>
  5. 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 >>
  6. What exactly is being done when shares are bought and sold?

    Most stocks are traded on physical or virtual exchanges. The New York Stock Exchange (NYSE), for example, is a physical exchange ... Read Answer >>
Hot Definitions
  1. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  2. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  3. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  4. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  5. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
  6. Weighted Average Life - WAL

    The average number of years for which each dollar of unpaid principal on a loan or mortgage remains outstanding. Once calculated, ...
Trading Center