Chartered Alternative Investment Analyst (CAIA) Practice Exam 2025 – All-in-One Guide to Master Your Certification!

The fourth market refers specifically to transactions that occur directly between institutional investors, bypassing traditional exchanges. This market facilitates the trading of securities that are not listed on public exchanges and includes instruments such as large blocks of stock or other financial instruments that are traded over-the-counter (OTC). In this market, trades can be executed without the oversight and transaction costs associated with exchanges, allowing for more efficient direct trading between large entities.

The other market definitions do not apply in the same way. The primary market involves the issuance of new securities directly from issuers to investors, primarily via initial public offerings (IPOs). The secondary market is where previously issued securities are bought and sold among investors, typically through exchanges. The third market refers to the trading of listed securities in the OTC market, which still involves securities that are publicly traded on exchanges but differs from the direct large-scale trades characteristic of the fourth market.