CFA Level I · CFA Level I Exam · Fixed-Income Issuance and Trading
Which of the following best describes how most corporate bonds are traded in the secondary market?
Most corporate bonds trade over the counter through dealers who quote two-way prices and take positions from their own inventory. Exchange order books carry only a small share of bond volume, and issuers do not run daily auctions to trade outstanding bonds.
- AOn a central limit order book run by a single national exchange
- BThrough dealers in an over-the-counter marketCorrect
- CThrough a daily call auction run by the issuer
Explanation
Most corporate bonds trade over the counter, where dealers quote bid and ask prices and trade from their own inventory. Exchange order books handle only a small share of bond volume, and issuers do not run daily auctions for outstanding bonds.
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