How are financial trades made in an over-the-counter market, Financial Management

Assignment Help:

How are financial trades made in an over-the-counter market? Discuss the role of a dealer in the OTC market.

In difference to the organized exchanges, which have physical locations, the over - the - counter market has no fixed location, or more correctly, it is everywhere. The over- the- counter market, or OTC, is a network of dealers around the world who maintain inventories of securities for sale. If you desire to buy a security that is traded OTC, you would contact your broker, who would then shop between competing dealers who have the security in their inventory. After locating the dealer with the greatest price, your broker would purchase the security on your behalf.

The role of dealers:  Dealers make their living reselling them to others and buying securities.  They work just like car dealers who buy cars from manufacturers for resale to others.  Dealers compose money by buying securities for one price called as the bid price and selling them for a higher price called as the ask price. The spread or difference between the ask price and the bid price represents the dealer's fee.

 


Related Discussions:- How are financial trades made in an over-the-counter market

Prepayments, Principal repayment before the scheduled date is calle...

Principal repayment before the scheduled date is called a prepayment. Every individual borrower normally has the option to pay off all or part of their loan

Leadership, AskThink back to a time when you have worked for a supervisor w...

AskThink back to a time when you have worked for a supervisor who moved from one leadership style to another based on situational variables described in the Long and Spurlock (2008

What is fv of a single present cash flow, Q. What is FV of a Single Present...

Q. What is FV of a Single Present Cash Flow? the future value of a single cash flow is defined in term of equation as follows: FV = PV (1 + r)n Where, FV = Future value PV = Pr

Expalin npv decision rule in basril plc, The NPV decision rule needs that a...

The NPV decision rule needs that a company invest in all projects that have a positive net present value. This presumes that sufficient funds are available for all incremental proj

base-case NPV, Ask question #MiniA project under consideration costs $750,...

Ask question #MiniA project under consideration costs $750,000, has a five-year life, and has no salvage value. Depreciation is straight-line to zero. The required return is 17 per

Budget, •What categories and in what amounts should Jenny allocate her fund...

•What categories and in what amounts should Jenny allocate her funds to reflect a balanced monthly budget? Include the main categories as well as examples of other categories.

Define primary reserves of a bank, What are a bank's primary reserves? When...

What are a bank's primary reserves? When the Fed sets reserve requirements, what is its primary goal? Vault cash and deposits in the bank's account at the Fed are employed to s

What is affiliated company, Q. What is Affiliated Company? Affiliated C...

Q. What is Affiliated Company? Affiliated Company - Company or other organization related through common ownership,common control of management or owners or through some other

Effective duration and convexity of callable bonds, The modified dura...

The modified duration is a measure of the sensitivity of a bond's price to interest rate changes; the assumption made here is that the expected cash flow does not

Main characteristics of the resource-based approach, Z Company is very succ...

Z Company is very successful as market leader in digital media products where it has demonstrated its ability to innovate in new product development and design at a very fast pace,

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd