Series 65: Second Market/Negotiated Market

Second Market/Negotiated Market

The second market (not to be confused with the “secondary” market) refers to the decentralized buying and selling of securities without one central market maker. This type of market, with no “auctioneer” like the Designated Market Maker on the floor of the NYSE, is referred to as a negotiated market. The second market includes both over-the-counter securities and the NASDAQ. This is an important and highly testable point. Instead of a physical place with a single market maker, the second market consists of electronic systems connecting multiple market makers who post competing bid and ask prices online. Orders are filled either automatically, with the computer matching the best quotes first, or by private negotiation. The second market is composed of exchange-listed securities that trade on the NASDAQ stock exchange and securities that trade on over-the-counter markets, such as the Over-the-Counter Bulletin Board (OTC