17.3. Third and Fourth Markets

The third market is a negotiated market where institutional investors and broker-dealers buy and sell exchange-listed securities over the counter. Third market activities generally involve large institutional investors who buy and sell on their own behalf or, if they are not market-makers, use a dealer to make the transaction. Listed securities traded in the third market are cheaper to execute because they save on brokerage commissions. Brokers charge a lower percentage commission for large block transactions.

Users of the third market typically