Kavan Choksi Singapore- What Are Auction and Dealer Markets in The Secondary Markets For a Trader?

Kavan Choksi Singapore

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For buying company shares, the secondary market is known as the stock market, and in the USA, it includes NASDAQ and the New York Stock Exchanges with other international exchanges as well. The secondary market is often confused with the primary market when it comes to dealing with equities. In order to trade successfully in the stock market, you must be aware of these fundamental differences for making informed choices. 

Kavan Choksi Singapore- What do the secondary market comprise of?

Kavan Choksi Singapore is a leading business and finance expert with a keen interest in fine art from across the globe. He says that in the secondary markets for trading securities, there is no involvement of the companies whose stocks are being sold. For instance, if you want to buy Amazon stocks, you will not be dealing with Amazon. You will be transacting with another investor who holds Amazon stock and wishes to sell them in the marketplace. 

What about the debt markets and bonds?

In the debt market, when you are dealing with bonds, the owner of this bond will get the total value when it matures. However, the maturity date is often far off in the future. So, instead of waiting, the owner of the bond can connect with another buyer and sell the bond a profit in the secondary markets for a neat profit in case there is a reduction of the rates of interest since the release of the bond in the secondary market. This makes the bond increase in value to the other parties who are interested in buying it at higher coupon rates. 

The trader should know the events and news that affect the stock market to make informed choices. So, one should be updated with the latest trends and developments that are taking place across the globe to make wise choices in the secondary markets. 

Auction markets and their role

Kavan Choksi Singapore states that secondary markets can be divided into auction markets and dealer markets. In the former, all of the institutions and the investors collect in one place, and they express their desire to trade. They buy and sell the securities at the prices that are announced in the market. They are known as bid and ask prices. The goal here is to bring the interested parties together in a single place and have them declare their prices publicly. The best example of the auction market is the NYSE in America.

Dealer markets and how are they different? 

The dealer markets are places where traders can congregate in different locations. The market participants join one another via an electronic network. The dealers conduct an inventory of security, and they are ready to sell and buy with the other participants in the market. 

They earn lucrative profits via the spread between these prices in which they sell and buy securities. The NASDAQ is an example of the dealer market, and generally, it is known as the market maker. 

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