Negotiated Market
Categories: Trading
A flea market would be a negotiated market. The buyer and the seller work out the price on their own...there isn't a third party involved who oversees the sale.
The person in the booth selling weird medieval paraphernalia has a broadsword for sale for $500 that was allegedly used on the set of one of the Lord of the Ring movies. You think that's probably a load of hype, but the sword is cool, so you offer $400. Eventually, you settle on $450. A negotiated market.
Many stock markets are negotiated markets. The NASDAQ, for instance. Buyers post bids. Sellers post asks. The market provides a system for them to find each other, but doesn't intervene directly.
Meanwhile, the NYSE works on a different system. It operates as an open outcry auction. Stocks have market makers who facilitate transactions when liquidity is low...there's a third party involved between the buyer and the seller shepherding the transactions.
Related or Semi-related Video
Finance: What is an Auction Market?13 Views
Finance a la shmoop... what is an auction market.. next up on the block [Man speaking on stage]
we've got stock in the company comb Depot....
okay yeah so the New York
Stock Exchange is an auction market and you have no idea how much caffeine I had [Man holding a monster energy drink]
to have to get that right which means that the prices on the new york stock
exchange happen during a bidding process we're matching offers get you know [People frantically rushing to bid for stocks]
matched... buyers and sellers buy and sell at the
same time so in essence two transactions are happening at once the opposite of
this sort of market is the over the counter or OTC market where dealers are
the ones holding all the cards and they ultimately determine the price by [Dealer with the cards]
creating a spread from where they're willing to sell your shares and what
price they'll pay to buy your shares but in an OTC market well you don't get to [Dogs running side by side]
feel like you're watching the last leg of a greyhound race so you don't get all
my caffeinated auction talk there which is kind of cool we like that, right..right?