SIE practice questionmediumFourth Market
Trading through Electronic Communication Networks (ECNs) where institutions trade directly with each other without broker-dealer intermediaries is characteristic of the:
- APrimary market
- BFourth market✓ Correct answer
- CThird market
- DSecondary market
Explanation
Why B — Fourth market
The fourth market involves direct institution-to-institution trading without using a broker-dealer as an intermediary. ECNs (Electronic Communication Networks) facilitate fourth market trading by matching buy and sell orders electronically. This allows large institutional investors to trade large blocks of securities with reduced transaction costs and greater anonymity. The third market involves exchange-listed securities traded OTC through broker-dealers.
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