EXCHANGE & OVER ENCOUNTER

MARKET
 Exchange = buyers & sellers meet in a central
location.
Example: New York Stock Exchange.

Over-the-Counter (OTC) Market = dealers at

different locations trade via computer and
telephone networks.
Examples: NASDAQ (National Association of
Securities Dealers Automated Quotation System);
US Government bond market.
 Secondary market can be organised in 2
ways:
Buyers & sellers of securities (or agents or brokers) meet in 1
central location to conduct trades.
New York and American stock exchanges for stocks and
Exchange Chicago Board of Trade for commodities (wheat, corn, silver
and other raw materials).

Dealers at different locations who have an inventory

of securities stand ready to buy and sell securities
over-the-counter to anyone who comes to them
and is willing to accept their prices.
Over-the Because OTC dealers are in computer contact and
know the prices set by one another.
encounter (OTC) OTC market is very competitive and not very
different from a market with an organized exchange.