Template:Bonds listed: Difference between revisions
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=== | ===Why aren’t [[debt securities]] [[traded on exchange]]?=== | ||
Unlike shares which can trade on exchange, in [[organised trading facility|organised trading facilities]] or [[over-the-counter]], [[debt securities]] ([[bond|bonds]], [[note|notes]], [[MTN]]s, [[certificate of deposit|certificates of deposit]] and so on) tend to [[traded|trade]] only [[over-the-counter]]. They are not [[traded on exchange]]. | Unlike [[shares]] which can trade on exchange, in [[organised trading facility|organised trading facilities]] or [[over-the-counter]], [[debt securities]] ([[bond|bonds]], [[note|notes]], [[MTN]]s, [[certificate of deposit|certificates of deposit]] and so on) tend to [[traded|trade]] only [[over-the-counter]]. They are not [[traded on exchange]], and (while in [[bearer]] form) tend not to be traded in the [[secondary market]] nearly as often. | ||
A given [[issuer]] tends to issue only one type of share (okay, maybe two - [[ordinary share]]s and [[preference share]]s). All of its [[ordinary share]]s are the same and are interchangeable (technically, they’re “[[fungible]]” with each other), meaning the same security is common across all [[venue]]s in the market. That’s what gets listed, and it is (relatively) [[liquid]]. | A given [[issuer]] tends to issue only one type of share (okay, maybe two - [[ordinary share]]s and [[preference share]]s). All of its [[ordinary share]]s are the same and are interchangeable (technically, they’re “[[fungible]]” with each other), meaning the same security is common across all [[venue]]s in the market. That’s what gets listed, and it is (relatively) [[liquid]]. | ||
By contrast, [[debt security|debt securities]]s come in all kinds of shares and sizes. The same [[issuer]] might issue hundreds of different series with different economic characteristics, maturities and yields and features. [[Bond|Bonds]] of one [[series]] are not [[fungible]] with bonds of other series. Hence a given [[bond]] is generally far less [[liquidity|liquid]] than an ordinary share of the same issuer. This, there are more issuers, and issues of bonds with different characteristics, which makes it difficult for bonds to be [[traded on exchange]]s. Another reason why bonds are traded [[over-the-counter|over the counter]] is the difficulty in listing current prices. | By contrast, [[debt security|debt securities]]s come in all kinds of shares and sizes. The same [[issuer]] might issue hundreds of different series with different economic characteristics, maturities and yields and features. [[Bond|Bonds]] of one [[series]] are not [[fungible]] with bonds of other series. Hence a given [[bond]] is generally far less [[liquidity|liquid]] than an ordinary share of the same issuer. This, there are more issuers, and issues of bonds with different characteristics, which makes it difficult for bonds to be [[traded on exchange]]s. Another reason why bonds are traded [[over-the-counter|over the counter]] is the difficulty in listing current prices. | ||
Latest revision as of 10:19, 20 May 2019
Why aren’t debt securities traded on exchange?
Unlike shares which can trade on exchange, in organised trading facilities or over-the-counter, debt securities (bonds, notes, MTNs, certificates of deposit and so on) tend to trade only over-the-counter. They are not traded on exchange, and (while in bearer form) tend not to be traded in the secondary market nearly as often.
A given issuer tends to issue only one type of share (okay, maybe two - ordinary shares and preference shares). All of its ordinary shares are the same and are interchangeable (technically, they’re “fungible” with each other), meaning the same security is common across all venues in the market. That’s what gets listed, and it is (relatively) liquid.
By contrast, debt securitiess come in all kinds of shares and sizes. The same issuer might issue hundreds of different series with different economic characteristics, maturities and yields and features. Bonds of one series are not fungible with bonds of other series. Hence a given bond is generally far less liquid than an ordinary share of the same issuer. This, there are more issuers, and issues of bonds with different characteristics, which makes it difficult for bonds to be traded on exchanges. Another reason why bonds are traded over the counter is the difficulty in listing current prices.