 English Auction- Prospective buyers submit an initial bid price.

Other interested bidders could bid higher than the initial bid price.
Bidding stops when no other bidders want to top the last bid.
 Descending price sealed auction (first-price sealed auction)- All
the bidders will submit sealed bids to seller. The bids are ranked
from highest to lowest. Highest priced bids receive full allocation
while lower bids receive allocations distributed pro rata.

 Tap Issue
- Occurs when issuers are open to receive bids for their securities at all
times.

Secondary Market

 Refers to the market where securities issued in the primary market are subsequently
traded, resold, and repurchased.
 Participants in the market include household, business and government who have excess
funds and household, business, and government who need funds.
 Transaction usually occurs with the help of securities broker which acts as a facilitator
between the seller and the buyer of the security.

 Economic functions
 Price Discovery
- Secondary market provides information about prices of the securities
traded which can influence economic decisions. The higher the price of
the security, the higher the price that issuing companies can set on new
securities they will issue.

 Liquidity and Reduction in Borrowing Cost

- Secondary market allows active trading which improves liquidity and
marketability of the securities. A liquid market also reduces interest rates
as liquidity premium can be removed.

 Support to the primary market

- Price discovery helps in giving information that can be helpful in:
 Setting prices for the new issuances executed in the primary
market, and
 Assessing receptiveness of the market for the new issuances.
  Implementation of monetary policy
- Allows regulators such as the BSP to trade securities to influence liquidity
and interest rates set in the financial system.

 Point of View of the Investors

 Secondary markets are beneficial as it gives them the opportunity to sell securities
at fair market value if they need cash or purchase additional securities that have
differing risk and return characteristics to diversify their portfolio.
 It provides liquidity to them.
 Provides information on the market value of the investments.

 Point of View of the Issuing Company

 Although they are not involved, it gives the issuing company an idea how much is
the fair market value if they need cash or purchase additional securities.
 It gives them an idea on how well they are using the funds obtained from the
securities issuance.
 Securities easily tradeable in the secondary market is perceived to be more liquid.

 Classification of secondary market based on market structure

 Order-Driven Market Structure

- Auction Market
- The buyers and sellers propose their price through their brokers who
conveys the bid in a centralized location.
- Types of Orders
 Market Orders (At-best orders)
o Orders are placed with broker-dealer
o The client relies on the expertise and integrity of the
broker-dealer

 Limit Orders
o Orders are placed when clients set a price or price range
that may be above/below the existing price

 Day Orders
o Orders placed that only valid until the end of the business
day