What is a Third Market?
Third markets are markets in which listed securities are traded over the counter by investors that are not listed with a stock exchange. Also known as an OTC or Over The Counter Market, the third market has traditionally been utilized as a means of trading large blocks of stocks between institutions. However, this is changing as more individual investors begin to explore third market transactions. In the past, the third market was an ideal arena for the buying and selling of investments as a means of funding corporate pension funds or to secure large blocks of stocks for use by investment companies or securities firms. Because the securities trading took place outside of such markets as the American Stock Exchange or the New York Stock Exchange, the movement would be more or less transparent to smaller investors. At the same time, the transactions conducted through a third market approach could be accomplished quickly and easily, allowing the buyer and the seller to maximize the profit
A third market is where exchange-listed securities are being traded over-the-counter by institutional investors and non exchange-member brokers/dealers for their own accounts, rather than as agents for investors. Third market transactions are typically large block trades. The third market developed in the 1960s when institutional investors became dissatisfied with the liquidity and brokerage commissions for large security trades on the exchanges. Transactions conducted through a third market could be accomplished quickly and easily which allows the buyer and the seller to maximize the profit gained from the transactions. There are no brokerage fees to be paid because transactions in a third market can be made directly by the investor.
