How Many Markets Do We Have Over The Globe?

DIRECT SEARCH MARKETS: A direct search market is the least organized market. Buyers and sellers meet up one on one to discuss the goods being sold. An example of a transaction in such a market is the sale of a used refrigerator where the seller advertises for buyers on Craigslist

BROKERED MARKETS The next level of organization is a brokered market. This market involves intermediary, rather than a direct contact between buyers and sellers, a so-called agents or brokers would act as an intermediary to assist both buyers and sellers with their transaction. For example, a broker could help buyers with the search of products or price discovery. On the other hand, a broker could help sellers to market their product on the platform.

THE PRIMARY MARKET: it is where new issues of securities are offered to the public, is an example of a brokered market. In the primary market, investment bankers who market a firm’s securities to the public act as brokers; they seek investors to purchase securities directly from the issuing corporation.

DEALER MARKETS When trading activity in a particular type of asset increases, dealer markets arise. Dealers specialize in various assets, purchase these assets for their own accounts, and later sell them for a profit from their inventory. The spreads between dealers’ bid and ask prices are a source of profit. Dealer markets save traders on search costs because market participants can easily look up the prices at which they can buy from or sell to dealers. A fair amount of market activity is required before dealing in a market is an attractive source of income.

AUCTION MARKETS The most integrated market is an auction market, in which all traders converge at one place (either physically or “electronically”) to buy or sell an asset. The New York Stock Exchange (NYSE) is an example of an auction market. An advantage of auction markets over dealer markets is that one need not search across dealers to find the best price for a good. If all participants converge, they can arrive at mutually agreeable prices and save the bid–ask spread.