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Unformatted text preview: ) exchange is
an intangible market for the purchase and sale of securities not listed by the organized exchanges. OTC traders, known as dealers, are linked with the purchasers
and sellers of securities through the National Association of Securities Dealers
Automated Quotation (Nasdaq) system.
This sophisticated telecommunications network provides current bid and ask
prices on thousands of actively traded OTC securities. The bid price is the highest
price offered by a dealer to purchase a given security, and the ask price is the lowest price at which the dealer is willing to sell the security. The dealer in effect adds
securities to his or her inventory by purchasing them at the bid price and sells
securities from the inventory at the ask price. The dealer expects to profit from
the spread between the bid and ask prices. Unlike the auction process on the
organized securities exchanges, the prices at which securities are traded in the
OTC market result from both competitive bids and negotiation.
Unlike the organized exchanges, the OTC handles both outstanding securities and new public issues, making it both a secondary and a primary market. The
OTC accounts for about 54 percent of the total dollar volume of domestic shares
International Capital Markets Although U.S. capital markets are by far the
world’s largest, there are important debt and equity markets outside the United
States. In the Eurobond market, corporations and governments typically issue
bonds denominated in dollars and sell them to investors located outside the
United States. A U.S. corporation might, for example, issue dollar-denominated CHAPTER 1 foreign bond
Bond that is issued by a foreign
corporation or government and is
denominated in the investor’s
home currency and sold in the
investor’s home market. international equity market
A market that allows corporations to sell blocks of shares to
investors in a number of different
countries simultaneously. 27 The Role and Environment of Managerial Finance bonds that would be purchased by investors in Belgium,...
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This document was uploaded on 01/19/2014.
- Fall '13