Listen to a Business English Dialogue About Fourth market
Hannah: Hi Audrey, have you heard about the fourth market in finance?
Audrey: No, Hannah. What’s the fourth market?
Hannah: The fourth market refers to direct trading between institutional investors, such as pension funds and mutual funds, without the involvement of stock exchanges or broker-dealers.
Audrey: Oh, I see. So, it’s like a private trading platform for large institutional investors?
Hannah: Exactly. The fourth market allows these investors to execute large trades efficiently and discreetly, minimizing market impact and transaction costs.
Audrey: How does trading in the fourth market differ from trading on traditional stock exchanges?
Hannah: Well, Audrey, in the fourth market, trades are typically executed through electronic communication networks (ECNs) or alternative trading systems (ATS), allowing for greater anonymity and customization of trade terms.
Audrey: Are there any advantages to trading in the fourth market?
Hannah: Yes, Audrey. Trading in the fourth market can offer advantages such as reduced market impact, lower transaction costs, and increased privacy for institutional investors executing large trades.
Audrey: What types of securities are commonly traded in the fourth market?
Hannah: Well, Audrey, securities commonly traded in the fourth market include stocks, bonds, and other financial instruments, particularly those with large trading volumes and liquidity.
Audrey: How does the fourth market impact liquidity and price discovery in the broader financial markets?
Hannah: The fourth market can impact liquidity and price discovery by providing an alternative venue for trading large blocks of securities, potentially reducing liquidity on traditional exchanges and affecting price formation.
Audrey: Thanks for explaining, Hannah. I have a better understanding of the fourth market now.
Hannah: No problem, Audrey. If you have any more questions about finance or trading, feel free to ask anytime.