Fourth: Institution to Institution, No Broker

2 questions on this screen, from this outline item's own pool, so some will test a rule you met earlier in the unit. Pick an answer, say how sure you are, then reveal. Being sure and wrong is the most useful thing that can happen here, and the coach treats it that way.

Question 1Exam level

In which market does the issuer always receive the proceeds of the sale?

A. The primary market B. The secondary market C. The third market D. The fourth market

How sure are you?

Sure Fairly sure Guessing

Correct: A. The primary market's whole definition is that the issuer receives the proceeds; there is no second condition.

B. In the secondary market the issuer receives nothing; cash moves between investors.

C. The third market is off-exchange trading of a listed security; the issuer is not a party to it.

D. The fourth market is institution-to-institution trading; the issuer receives nothing there either.

Unit: SIE outline 1.2.1

Question 2Above the exam

A broker-dealer executes a $50 million block trade for an institutional client, taking the position onto its own books first. Two hours later, two other institutions cross an unrelated $200,000 position directly through an ATS with no dealer. Which of the two trades is fourth market?

A. The $50 million block, because of its size B. The $200,000 trade, because no dealer stood between the two institutions C. Both, because both involve institutions D. Neither, because fourth market requires an exchange listing

How sure are you?

Sure Fairly sure Guessing

Correct: B. The fourth market is defined by the absence of a dealer, never by size. The $50 million trade went through a dealer's own books, so it is a dealer trade regardless of size; the smaller $200,000 trade had no dealer at all, so it is the fourth market.

A. Size never defines the fourth market; a dealer stood on the other side of this trade.

C. Only the trade with no dealer qualifies; involving institutions alone is not the test.

D. Nothing in the fourth-market definition requires an exchange listing; it requires the absence of a broker-dealer.

Unit: SIE outline 1.2.1

Fourth: Institution to Institution, No Broker

Now answer