1. Summary
  2. The Fourth Market
  3. Understanding the Fourth Market
  4. Primary, Secondary, Third, & Fourth
  5. The Fourth Market and Dark Pools


Over-the-counter (OTC) is the method of commercializing securities via a principal network as hostile on a centralized exchange just like the NY securities market. Over-the-counter commercialism will involve stocks, bonds, and derivatives, which are monetary contracts that derive their worth from underlying quality like a commodity. When corporations don’t meet the wants to list on a customary market exchange like the New York Stock Exchange, their securities will be listed over-the-counter however should be subject to some regulation by the Securities and Exchange Commission. Let’s see regarding the Fourth Market

The Fourth Market

The fourth market refers to a market wherever securities trade directly between establishments on a non-public, over-the-counter (OTC) electronic network, instead of over a recognized exchange like the NY securities market (NYSE) or information system. It’s kind of like the third market, which involves exchange-listed securities that are being listed over the counter between broker-dealers and enormous institutional investors. Fourth-market commercialism differs from third-market commercialism in this no intermediator or broker is facilitating the trade. Establishments directly trade with one another while not brokers or dark pools.

Institutions will trade numerous forms of securities and derivatives contracts on the fourth market, usually to extend obscurity or to result in massive trades while not moving the market.

  • The fourth market is an over-the-counter marketplace for the direct exchange of securities between personal establishments.
  • The fourth market lacks a broker or exchange intermediator, so provides very little transparency to the general public or regulators.
  • Institutions utilize the fourth market to stay commercialism activities personal, scale back group action prices, and interact with massive volumes while not moving markets.

Understanding the Fourth Market

The fourth market is employed alone by establishments solely and might be contrasted with the first market, secondary market, third market, and dark pools. Whereas primary, secondary, and third markets have similar commercialism mechanisms and utilize similar technologies because the fourth market, these markets are exchanges of publically offered shares for all investors as well as retail and institutional.

Often the fourth market is employed for commercialism securities that involve a company’s risk management strategy. as an example, swap choices are one sort of by-product that may be listed through the fourth market directly with a willing counterparty to manage the rate of interest risk. With a place swaption, an establishment will enter a contract to pay a hard and fast rate of interest and receive a floating rate of interest referring to credit debt on its record.

In different cases, corporations could opt to exchange securities in camera to forestall moving markets. This might occur if an investment firm and a pension fund enter into an oversized block trade with one another. The 2 corporations might interact over who transmission network (ECN). By death penalty the group activities in this manner, they avoid the likelihood of distorting the value of the listed on the exchange. Each party may additionally avoid brokerage and exchange group action fees.

Primary, Secondary, Third, & Fourth

Market exchanges are a major facet of the monetary industry’s infrastructure globally. In the U.S., primary, secondary, and third markets are all viable components of the financial setup. Primary markets embrace the primary supply of a security and its initial public giving (IPO). Secondary markets are markets like the NY securities market and information system that trade actively throughout the day, 5 days per week. Third markets conjointly trade actively with a five-day week and are called the over-the-counter markets. All of those markets offer access for all kinds of investors to publically listed securities that have to be registered with the Securities and Exchange Commission (SEC) for public sale.

The Fourth Market and Dark Pools

Fourth markets are usually a lot of closely admire dark pools, with the 2 phrases usually used interchangeably. These markets are personal exchanges that trade solely between institutional investors. A large variety of securities and structured products will trade on the fourth market with very little transparency to the broad public market.

Fourth market trades are transacted between establishments. These trades are usually placed directly from every establishment with low group action prices. The fourth market will comprehend a broad array of securities as well as publically offered securities listed in camera also as derivatives and structured products tailored to the wants of company establishments.

These commercialism platforms will be found out by freelance corporations or they’ll be fashioned by establishments themselves. Liquidity and commercialism volume will vary extensively with this kind of trading.