Secondary market organise exchanges-over the counter markets, Financial Management

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How can secondary market organised the exchanges and over the counter markets?

Exchanges and over-the-counter (OTC) markets:

Secondary markets can be organised by exchanges or over the counter (OTC) markets.

• In exchanges, buyers and sellers (by their brokers) transact into one central location to conduct trades. Illustrations are the New York Stock Exchange (NYSE) that recently obtained the American Stock Exchange (AMEX) and the London Stock Exchange (LSE).

• In over-the-counter markets, dealers at various locations have an inventory of securities, and they are ready to buy and sell such securities ‘over-the-counter’ to anyone willing to admit their price. Due to the technological links among dealers regarding prices, over the counter markets are competitive and not extremely diverse from organised exchanges. Over the counter trading is most important into the USA, where needs for listing stocks onto the exchanges are rather strict. Illustrations of over the counter markets are: the US government bond market and NASDAQ stands for National Association of Securities Dealers Automated Quotation System stock exchange. The national association of securities dealers automated quotation system is the second largest US market. Usually, this used to be a pure dealer market.


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