Financial Markets and Financing - Financial Markets and Securities Offerings - Primary Markets and Secondary Markets

6 important questions on Financial Markets and Financing - Financial Markets and Securities Offerings - Primary Markets and Secondary Markets

What is the difference between brokers and dealers?

A broker facilitates security trades on behalf of investors.

A dealer facilitates security trades on behalf of itself.

What is the NASD's computerized trading system called and what is its functionality?

The NASD's computerized trading system is the NASDAQ, the NASD Automated Quotation system. The NASDAQ supplies price quotes and volume amounts during the trading day.

What kind of transactions does the OTC market handle?

The OTC market handles transactions involving:
  • bonds of U.S. Companies
  • bonds of federal, state, and local governments
  • open-end investment company shares of mutual funds
  • new securities issues (of companies not traded on the stock exchange)
  • most secondary stock distributions, whether or not they are listed on an exchange
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What is most distinctive about the OTC market?

The OTC market conducts transactions in securities not traded on the stock exchange.

Who is the governing authority for the OTC market?

The governing authority for the OTC market is the National Association of Securities Dealers (NASD).

What is the difference in relationship with the issuer regarding trading in bonds vs trading in stocks?

  • With the issuer of a bond, there is a creditor relationship represented by the dept security.

  • With the issuer of stock, there is an ownership relationship. An equity security represents an ownership interest in an entity.

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