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An Introduction to Trading in the Financial Markets: Trading, Markets, Instruments, and Processes by R. Tee Williams

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Secondary Market Process

The secondary market provides a mechanism for investors and traders who are interested in buying an instrument to find other investors or traders interested in selling the instrument (see Figure 4.2). When the counterparty is found, the market facilitates a trade between buyer and seller (or their agents), then manages the activities involved in guaranteeing the trade will be completed, and then settles the trade after all the preliminary activities are complete.

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Figure 4.2 The secondary markets permit buyers and sellers to trade issues already outstanding after the completion of the primary market process.

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