what’s the difference of secondary market, OTC, and third market?
OTC has both secondary and third markets OTC(traded by members through exchange) are considered secondary markets. Part of OTC where nonmember firms trade is Third market. without going through exchange.
I suggest tio give examples of each kind of the markets listed above… What do you think guys?
I look at a secondary market as a general term that refers to the market where securities are traded after their IPO. Within a secondary market, you have OTC, a registered exchange, and/or a 3rd Market. The 3rd market specifically falls under the OTC market and it’s where non-member investment firms can make markets in and trade registered securities without going through the exchanges. Examples I can think of would be: OTC=NASDAQ. Physical/registered Exchange=NYSE. there is also this thing called a 4th mkt. it involves the direct exchange of securities between investors without using a broker.
I finally got a very clear answer on http://www.investopedia.com/articles/02/101102.asp check it out. Secondary Market The secondary market is what people are talking about when they refer to the “stock market”. This includes the New York Stock Exchange (NYSE), Nasdaq and all major exchanges around the world. The defining characteristic of the secondary market is that investors trade amongst themselves. That is, in the secondary market, investors trade previously-issued securities without the involvement of the issuing companies. For example, if you go to buy Microsoft stock, you are dealing only with another investor who owns shares in Microsoft. Microsoft (the company) is in no way involved with the transaction. (To learn more, check out How Does Someone Actually Transact Securities?) The secondary market can be further broken down into two specialized categories: auction market and dealer market. In the auction market, all individuals and institutions that want to trade securities will congregate in one area and announce the prices at which they are willing to buy and sell. These are referred to as bid and ask prices. The idea is that an efficient market should prevail by bringing together all parties and having them publicly declare their prices. Thus, theoretically, the best price of a good need not be sought out because the convergence of buyers and sellers will cause mutually-agreeable prices to emerge. The best example of an auction market is the NYSE. (For more information, see Working Through The Efficient Market Hypothesis and What Is Market Efficiency?) In contrast, a dealer market does not require parties to converge in a central location. Rather, participants in the market are joined through electronic networks (from low-tech telephones or fax to complicated order-matching systems). The dealers hold an inventory of the security in which they “make a market”. The dealers then stand ready to buy or sell with market participants. These dealers earn profits through the spread between the prices at which they buy and sell securities. An example of a dealer market is the Nasdaq, in which the dealers, who are known as market makers, provide firm bid and ask prices at which they are willing to buy and sell a security. The theory is that competition between dealers will provide the best possible price for investors. Sometimes you’ll hear a dealer market referred to as an over-the-counter (OTC) market. The term originally meant a relatively unorganized system where trading did not occur at a physical place, as we described above, but rather through dealer networks. The term was most likely derived from the off-Wall Street trading that boomed during the great bull market of the 1920s, in which shares were sold “over-the-counter” in stock shops. In other words, the stocks were not listed on a stock exchange - they were “unlisted”. Over time, however, the meaning of OTC began to change. The Nasdaq was created in 1971 by the National Association of Securities Dealers (NASD) to bring liquidity to the companies that were trading through dealer networks. At the time, there were few regulations placed on shares trading over-the-counter - something the NASD sought to improve. As the Nasdaq has evolved over time to become a major exchange, the meaning of over-the-counter has become fuzzier. Today, the Nasdaq is still considered a dealer market and, technically, an OTC. However, today’s Nasdaq is a stock exchange and, therefore, it is inaccurate to say that it trades in unlisted securities. Nowadays, the term “over-the-counter” refers to stocks that are not trading on a stock exchange such as the Nasdaq, NYSE or American Stock Exchange (AMEX). This generally means that the stock trades either on the Over-the-Counter Bulletin Board (OTCBB) or the pink sheets. Neither of these networks is an exchange, in fact, they describe themselves as providers of pricing information for securities. OTCBB and pink sheet companies have far fewer regulations to comply with than those that trade shares on a stock exchange. Most securities that trade this way are penny stocks or are from very small companies. (To learn more, see Getting To Know Stock Exchanges.) Thanks everyone for your contribution!