Chapter 3 - How Securities are Traded

Question 1

What is a direct search market?

Answer 1

Where buyers and sellers seek one another out.. eg. advertising in local paper

Question 2

What is a Brokered market?

Answer 2

Trading in a good is active, brokers offer search services to buyers and sellers. Real estate for example. Brokers develop specialised knowledge in valuing assets trade in that market

Question 3

What is a Dealer market?

Answer 3

Particular types of assets. Dealers purchase assets for themselves and sell on for higher price. Buy (bid) / sell (ask) spread generates profit

Question 4

What are Auction markets?

Answer 4

All traders converge in one place - eg. London Stock Exchange - one does not need to search amongst dealers to find the best price - all prices converge

Question 5

Price-Contingent orders. What are they?

Answer 5

Investors can place order specifying prices at which they are willing to buy or sell. A limit buy order may instruct the broker to buy some number of shares at or below a stipulated price.