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Third markets, also known as over-the-counter (OTC) markets, are used for trading large blocks of shares between institutions. However, with the advent of online trading, individual investors are also exploring third-market transactions, which offer anonymity and lower costs. Beginners should focus on trading through a brokerage before considering the third market.
Third markets are financial markets in which listed securities are traded over the counter by non-listed investors. Also known as an over-the-counter (OTC) market, a third market has traditionally been used as a means of trading large blocks of shares between institutions. However, this has changed as more individual investors have begun to explore third-market transactions by investing and trading stocks online.
maximizing profits
In the past, a third market was an ideal arena for buying and selling investments as a means to finance corporate pension funds or to secure large blocks of shares for use by investment companies or securities firms. This stock trading took place outside of markets like the United States Stock Exchange or the New York Stock Exchange, so the move would be more or less transparent to smaller investors. At the same time, transactions carried out through a third-market approach could be accomplished quickly and easily, allowing both the buyer and the seller to maximize the benefit gained from the transactions.
Influx of individual investors
Although once the province of institutional investors, the third market has seen an increase in the active presence of individual investors. This phenomenon can be attributed to the advent of the Internet. Beginning in the 1990s and continuing into the 21st century, online trading has opened up a whole new world for investors who are not operating on behalf of a larger institution. These investors find that using third-market trading is fast, offers excellent variety, and allows for more anonymity than trading on an exchange.
Another advantage of trading on the third market has to do with the costs of working through a broker. Transactions in a third market can be carried out directly by the investor, so there are no brokerage commissions to pay. Although many online trading sites charge a transaction fee, it is typically much less than a standard broker fee. The end result is that the investor will pay less to fill an order, which can be a very attractive benefit for many investors.
Experience often required
At the same time, the third market is not a good place for beginners. People who are new to investing would do well to focus on trading through a brokerage. After the new investor has become more proficient in making projections and evaluating investments, a third market becomes a more viable option to invest in.
Smart Asset.
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