Where do most bond transactions typically take place?

Where do most bond transactions typically take place?

• A. Centralized stock exchange
• B. Directly with the company
• C. Decentralized over-the-counter markets
• D. In investment banks only

Answer: (C)

Most bond transactions typically occur in decentralized over-the-counter (OTC) markets. This is primarily because the bond market is not as centralized as the stock market. In the OTC market, bonds are traded directly between buyers and sellers through a network of dealers rather than on a formal exchange. This allows for greater flexibility and a wider range of bond types to be traded, including corporate bonds, municipal bonds, and government securities. The involvement of various dealers in the OTC market also facilitates price discovery and liquidity, which are crucial for bond trading. As a result, most bond transactions are conducted outside of a centralized stock exchange, making the decentralized OTC markets the primary venue for these trades.

Most bond transactions typically occur in decentralized over-the-counter (OTC) markets. This is primarily because the bond market is not as centralized as the stock market. In the OTC market, bonds are traded directly between buyers and sellers through a network of dealers rather than on a formal exchange. This allows for greater flexibility and a wider range of bond types to be traded, including corporate bonds, municipal bonds, and government securities.

The involvement of various dealers in the OTC market also facilitates price discovery and liquidity, which are crucial for bond trading. As a result, most bond transactions are conducted outside of a centralized stock exchange, making the decentralized OTC markets the primary venue for these trades.