SIE practice questionmediumAuction Market vs. Dealer Market
The NYSE is considered an auction market because:
- AMarket makers set the prices for all securities
- BSecurities are sold to the highest bidder at periodic auctions
- CBuyers compete with other buyers and sellers compete with other sellers to get the best price✓ Correct answer
- DOnly institutional investors may participate in the bidding process
Explanation
Why C — Buyers compete with other buyers and sellers compete with other sellers to get the best price
In an auction market like the NYSE, buyers compete with other buyers (bidding up prices) and sellers compete with other sellers (offering lower prices), with transactions occurring at the point where bids and asks meet. This differs from a dealer market (like Nasdaq) where market makers set bid and ask prices and trade from their own inventory. The auction market is open to all qualified participants, not just institutions.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 1,867+ SIE questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Spot an error in this question or explanation? Tell us — we fix these fast.
Related Capital Markets & Offerings questions
- Which of the following is TRUE about the Nasdaq market?
- Which statement about the OTC (over-the-counter) market is TRUE?
- Dark pools are alternative trading systems (ATS) that are primarily used to:
- Which of the following is an example of an exchange market?
- In a primary market transaction, the proceeds from the sale of securities go to:
- Trading through Electronic Communication Networks (ECNs) where institutions trade directly with each other without…
- An initial public offering (IPO) is best described as:
- When an investor buys shares of Apple stock on the New York Stock Exchange (NYSE), this transaction takes place in the: