ExchangesBuyers and sellers of securities meet at a central location to conduct tradeOTC Dealers at different locations having inventory of securities stand ready to buy and sell securities OTC to anyone who comes to them and is willing to accept their price.It is competitive as dealers are in computer contact and know the price set by one another. explain this but in simple wording
Question
ExchangesBuyers and sellers of securities meet at a central location to conduct tradeOTC Dealers at different locations having inventory of securities stand ready to buy and sell securities OTC to anyone who comes to them and is willing to accept their price.It is competitive as dealers are in computer contact and know the price set by one another. explain this but in simple wording
Solution
Sure, let's break it down:
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Exchanges: This is like a marketplace where people who want to buy and sell things like stocks or bonds can meet. It's a central place where all the trading happens.
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OTC Dealers: These are people who have a stock of things like stocks or bonds and are ready to buy or sell them "over the counter" (OTC). This means they don't do it at a central exchange, but rather directly with the person who wants to buy or sell. They can be located anywhere and they set their own prices.
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It's competitive: Because these OTC dealers are all connected by computers, they can see the prices that others are setting. This means they have to compete with each other to offer the best prices.
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