What defines the fourth market?

The fourth market is characterized by transactions involving large blocks of securities that are conducted directly between institutional investors or traders without the use of a broker. This form of trading typically takes place over the counter (OTC) and is aimed at reducing costs associated with broker commissions and increasing transaction speed for significant volume trades.

This method of trading allows large investors to buy or sell substantial quantities of stock or bonds without impacting the market price significantly, since these transactions typically occur off the public exchanges. The focus is on the efficiency and privacy of trading large amounts of securities, distinguishing it from other markets where broker involvement is prevalent.

In contrast, transactions conducted by retail investors do not define the fourth market, as retail trading usually occurs in the first or second market. Moreover, the definition does not pertain specifically to exchange-listed securities, which are typically associated with the first and second markets. The requirement for a mandatory daily volume of stocks traded is irrelevant to the concept of the fourth market, which is more about the method of trading rather than any volume specifications.