SIE Knowledge of Capital Markets Question 6: Answer and Explanation

Question: 6

Which of the following describes the fourth market (dark pools)?

• A. Initial public offerings
• B. Companies trading without broker commissions
• C. Over-the-counter market
• D. Penny stocks

Correct Answer: B

Explanation:

B: The fourth market (deep pools) refers to companies trading with each other with a wide range of securities, even customized derivatives, without broker commissions. Choice A occurs directly between the issuer and the investment broker and/or investors. Choice C refers to various venues in which computerized trading occurs, including part of the trading of exchanges. Choice D refers to low-priced equity securities that may be thinly traded and highly speculative and may not meet the qualifications.