a. The secondary market is also called the aftermarket.
b. The trade-in these markets takes place between:
i. Investor à Investor: The trade takes place between the two investors and nothing generally passes through the issuer.
ii. Investor à Dealer à Investor: Here the dealer acts as a principal between the two investors.
iii. Investor à Dealer à Dealer à Investor: In such a deal, the dealer acts as an agent. The investors here, especially in the bonds market are the institutional or central bank, because of the large size of investment required in such markets. There is very little retail trading in such markets.
c. Some of the bonds on the secondary market are also exchange-listed. But most of the bonds that are listed on the exchange are corporate and not government bonds.
d. Mostly, the bonds are traded over-the-counter (OTC). The dealers in such markets act as the market makers, i.e. they post the bid and the offer price. These dealers mostly make a profit from the spread. Lower the spread more is the liquidity in the market.
e. The settlement in the secondary markets take place as follows:
i. For the government and quasi-government securities, the settlement takes place on T+1 day.
ii. For corporate securities, the settlement takes place in T+3 days.
iii. All the money market settlements take place on the same day.