About the Third and Fourth Stock Trading Markets

On OTC and Private Transactions


By Dr. David Edward Marcinko MBA


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In most cases, a market maker of a stock in the NASDAQ system must report his trade in 90 seconds, but there is another circumstance in which the trade must be reported. This is called the third market, and is defined as transactions in exchange listed securities in the OTC market.

For example, even though IBM is listed on the NYSE, an OTC market marking firm can acquire the IBM stock and begin to make a market for it just like an OTC stock. All of these trades are considered the third market, and are reported to the Consolidated Quotation System (CQS) within 90 seconds of the trade.

Fourth Market

The fourth market is defined as private transactions made directly between large investors, institutions such as banks, mutual funds, and insurance companies without the use of a securities firm.

In other words, fourth market trading is usually one institution swapping securities in its portfolio with another large institution. From the stock broker’s viewpoint, there is one problem with the fourth market.


Since no broker/dealer is involved, no registered representative is involved and there is no commission to be earned. These trades are reported on a system called Instinet. This is advantageous to larger medial foundations or institutional investors.


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Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com


One Response

  1. Is NASDAQ going to hit 5200 again?

    A colleague asked me this question, recently. I remember the old days. So to answer, here is a chart:


    Look at the chart from 1980 to present and you will see an artificial spike in 1999-2000 and then a crash

    If you ignore the spike, the current level of 4000 is pretty reasonable as a 35 year trend. I would guess within 36 months we could see 5,000

    Dr. Bill


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