How Stock are Traded on secondary markets

After new stocks and bonds have been sold investors can negotiate them in the secondary markets. The company (initial issuer of stocks) those not receive incomes from negotiated stocks. As a matter of fact  negotiations have made between stock bearers and new investors that want to buy those valuables.

Secondary markets are important for providing not only liquidity, but for a fair pricing over its values, if not a base to establish prices of new issues and Ipos.

How are bonds negotiated: Treasury bonds are negotiated in the Treasury market through 35 primary negotiators that include some of the largest investment banks and money-center banks. These negotiators can also form a government agency bond market (buying and selling). Banks and investment banks are also market-makers in what municipal bonds refer to because they underwrite and invest in many of the municipal bonds issued.

Though a small percentage fo corporate bonds are listed in bond markets negotiators that make a market with bonds negotiate most of them in the OTC market. Bonds are negotiated through secondary market agents.

The majority of bonds are negotiated in the OTC before than in the bond market. Many brokerage firms act as agents or negotiators using their own inventory to cover buying and selling orders.

The biggest difference between an agent and a negotiator is that agents act in name of clients to issue orders while negotiators negotiate valuables in their own name. A negotiator is also recognized as a market-maker.

Consequently an individual investors buying or selling bond order can be covered a brokerage firm with its own inventory in which case the agent becomes a negotiator. If it is not like that the order goes to a negotiator that makes a market from that particular bond.

Transactions costs are much higher for bonds than for stocks because of larger spreads. Spread is the difference between what the negotiator pays for bonds and the actual selling price. Transparency in bond market prices is rather poor and investors frequently know little about spreads being managed. Markups are stipulated by the negotiator and incorporated to bond prices.

Some progress has been made to make market prices reach more investors and some bond prices are being listed in the Bond Market Association?s Web Site