Welcome to Market Structure: the framework for understanding how and where securities are bought and sold.
Exam Weight: This unit is part of Knowledge of Capital Markets. The full section accounts for 12 scored questions (16% of the exam). The official outline does not assign a separate question count to this unit.
What You'll Learn
- The four categories of securities markets and what distinguishes each one
- How new securities are created and sold for the first time through IPOs and follow-on offerings
- Where existing securities trade between investors, providing liquidity and price discovery
- How exchange-listed securities trade off-exchange in the OTC market
- How institutions trade directly with each other through Electronic Communication Networks
- How liquidity, price discovery, auction vs. negotiated markets, and market makers tie everything together
Why This Matters
The SIE exam frequently tests whether you can distinguish between the four types of markets, especially who receives the proceeds, where trading takes place, and who participates. Understanding market structure also helps you answer questions about how securities move from issuance to ongoing trading, and why different market venues exist for different types of participants.
Let's start with an overview of the four types of markets and what sets each one apart.