FBLA Banking and Financial Systems Practice Test 2025 – Comprehensive Exam Prep

The dealer market is characterized by a network of dealers who are assigned to specific securities. These dealers act as intermediaries, providing liquidity by buying and selling securities to and from investors. Their role is crucial because they hold inventory and are always ready to make transactions, which helps to facilitate trading even when there may not be immediate buyers or sellers for a particular security.

In this market, prices are determined by the supply and demand for securities, and the dealers earn a profit from the difference between the buying and selling prices (the bid-ask spread). This structure ensures that investors can access securities without the need for a direct match of buyers and sellers at any given moment, enhancing market efficiency and liquidity.

In contrast, the secondary market generally involves the trading of previously issued securities, where liquidity can vary widely depending on the interest in the particular securities. An auction market relies on competitive bidding processes, where prices are determined through the interaction of buyers and sellers, which may not provide the same level of immediate liquidity. The bond market could refer to any market dealing with bonds but does not specifically denote the structure that provides assigned dealers for liquidity. Thus, the dealer market is the most accurate choice for this scenario.