Secondary market trading

The relative liquidity of the Eurobond market compared to the United States is a hotly debated question. The general impression is that the Eurobond market is less liquid than the US corporate sector. The average transaction size is greater in the United States, reflecting the market s larger size ( 1,679 billion versus 651 billion) and the concentrated structure of the investor base. Other obvious liquidity metrics, such as bid/offer spreads are hard to track consistently. What is true is that secondary market trading conventions have converged over time. 

As was clarified in Section 3, the Norwegian regime provides the possibility of requiring capacity in two markets, the primary and the secondary market. In the primary market long term, medium term and shortterm rights are traded. In the primary market capacity rights are traded at tariffs determined and published by Norwegian authorities. Tariffs in the primary market are fixed for each individual and predefined zone of the transportation system. 

Unused capacity rights bought in the primary market shall, under given conditions, be released to the secondary market. In the secondary market transportation rights may be traded at any price at the marketplace. The marketplace is facilitated by Gassco or by bilateral agreements. 

The need for timely and profitable exits for buyout firms has given rise to a growing secondary market for buyout transactions. Although they are historically less lucrative than both IPOs and trade sales, secondary buyouts have increased in importance and acceptance in recent years (Davison, C.). For example, Ripple-wood sold Kraton Polymers to the Texas Pacific Group in 2003 for USD 770 million and in 2004 Borden Chemical, held for nine years by KKR, scrapped its IPO plans and was sold instead to Apollo for USD 1.2 billion. 

Smaller and more frequent auctions are likely to encourage participation by smaller bidders. For example, firms who wish to purchase at auction rather than on the secondary market may not have a large enough line of credit to purchase 5 years worth of permits in advance. This is a substantial asset to hold on the balance sheet and one-off auctions might deter small bidders without deep pockets . These bidders would still trade on the secondary market, but the auctions themselves would be less competitive. 

The ideal trade-off between ensuring a competitive auction with low transactions costs and providing steady liquidity is difficult to judge before we have gained more experience with allowance auctions. If auctions were to be based on experience with electricity markets, then a frequent uniform price auction (e.g. weekly), would allow small participants to directly acquire the allowances they need to cover their emissions in the auction.34 High frequency would ensure that bidders pay a price close to the price on the secondary market at the time of emission, thus limiting risk exposure. In electricity markets this approach has been successfully implemented with low transaction costs (various pool type market designs). 

The date used as the point for calculation is the settlement date for the bond, the date on which a bond will change hands after it is traded. For a new issue of bonds the settlement date is the day when the bond stock is delivered to investors and payment is received by the bond issuer. The settlement date for a bond traded in the secondary market is the day that the buyer transfers payment to the seller of the bond and when the seller transfers the bond to the buyer. Different markets will have different settlement conventions for example, UK gilts normally settle one business day after the trade date (the notation used in bond markets is T+ 1) whereas Eurobonds settle on T + 3. The term value date is sometimes used in place of settlement date, however the two terms are not strictly synonymous. A settlement date can only fall on a business date, so that a gilt traded on a Friday will settle on a Monday. However a value date can sometimes fall on a nonbusiness day. 

As part of its role in maintaining an orderly and efficient market the DMO conducts business in the secondary markets in line with specific requirements and demand. This business generally involves trading with GEMMs in response to particular situations, including the following ... 

An investor should be able to replicate the index and its performance with a small number of instruments as well as with relatively low transaction costs and without moving the market too much. For this reason the index constituents should be a set of bonds that have standard features, are liquid, and trade actively in the secondary market. The ability to invest in the index through derivative instruments such as futures and total return swaps is an added attraction of an index. 

The concept of trust is particularly well suited to Eurobond issuance because the concept supports an environment in which investors normally hold such bonds anonymously through a clearing system and actively trade such bonds on the secondary market. 

Interest rate swaps trade in a secondary market, where their values move in line with market interest rates, just as bonds values do. If, for instance, a 5-year interest rate swap is transacted at a fixed rate of 5 percent and 5-year rates subsequently fall to 4.75 percent, the swap s value will decrease for the fixed-rate payer and increase for the floating-rate payer. The opposite would be true if 5-year rates moved to 5.25 percent. To understand why this is, think of fixed-rate payers as borrowers. If interest rates fall after they settle their loan terms, are they better off No, because they are now paying above the market rate on their loan. For this reason, swap contracts decrease in value to the ftxed-rate payers when rates fall. On the other hand, floating-rate payers gain from a fall in rates, because... 

Strips created from whole-loan CMOs trade differently from those issued out of agency CMOs, due to the nature of the underlying collateral they are viewed differently by investors and so their secondary market characteristics are less liquid. 

Two individuals also cited aging aircraft as a serious concern. They noted that there are a tremendous number of older airplanes flying today, and pointed out that this number is only going to grow, since companies are trying to maximize the productive lifetimes of their aircraft in order to get the most out of their investments. By contrast, one respondent stated that before deregulation, when an airplane got to be six to eight years old, the major U.S. airlines traded it in and sold it in secondary markets (e.g., overseas or for... 

This formula calculates the fair price on a coupon payment date, so there is no accrued interest incorporated into the price. Accrued interest is an accounting convention that treats coupon interest as accruing every day a bond is held this accrued amount is added to the discounted present value of the bond (the clean price) to obtain the market value of the bond, known as the dirty price. The price calculation is made as of the bond s settlement date, the date on which it actually changes hands after being traded. For a new bond issue, the settlement date is the day when the investors take delivery of the bond and the issuer receives payment. The settlement date for a bond traded in the secondary market—the market where bonds are bought and sold after they are first issued—is the day the buyer transfers payment to the seller of the bond and the seller transfers the bond to the buyer. 

The mark-to-market accounting rules accelerated the problem by creating a downward spiral of asset values as the secondary market dried up. Banks had to mark ABS assets at the market price, unconnected with the default performance of the underlying portfolios however, in a flight-to-quality environment, all structured credit products became impossible to trade in the secondary market, so values were marked down almost daily, in some cases down to virtually zero. The price of many securitized mortgage pools is well below their value now. The accounting rules force banks to take artificial hits to their capital without taking into account the actual performance of the pool of loans. 

This gets more complicated because after a bond is issued it is usually traded in the secondary market, where a buyer and seller... 

It is important to point out that most individual investors do not trade bonds on the secondary market as do institutions— the general strategy is to buy and hold to maturity. However, some knowledge of how bonds are traded in the general marketplace can give a clearer understanding of fixed-income products in general. 

When brokerages buy bonds in huge blocks from the government, companies, and municipalities, the firms hold them as "inventory," later trading them on the market (called the "secondary market") or selling them to clients. Sometimes, brokers will push a bond from their inventory because they can make more on the markups in this manner. 

Consider now a modified model where a seeondary market opens at some point during the sales season, dividing it into periods 1 (prior to the opening of the secondary market) and 2 (subsequent to the opening of the secondary market). At the beginning of period 1, retailer i orders from the manufacturer, which is delivered immediately. First-period retailer sales x, are realized. At the end of period 1 the seeondary market is opened where retailers trade units at a uniform price P2, which is endogenously determined to clear the market. Given P2, each retailer chooses a stock level for the second period. Sales y, are realized in period 2. x- and are random variables independently drawn from distribution functions iq ( ) and F2 ( )... 

Secondary cellulose acetate has also been used for fibres and lacquers whilst cellulose triacetate fibre has been extensively marketed in Great Britain under the trade name Tricel. 

The American Zinc Association is a trade organization comprising primary and secondary producers of zinc metal, zinc oxide and zinc dust marketed in the United States. 

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