Once securities are issued to the public, investors may trade them among themselves.  Purchase and sale of already-issued securities take place in the secondary markets, which consist of (1) national and local securities exchanges, (2) the over-the-counter market, and (3) direct trading between two parties.

1.  There are several stock exchanges in the United States.  Two of these, the New York Stock Exchange (NYSE) and the American Stock Exchange (Amex), are national in scope.  An exchange provides a facility for its members to trade securities, and only members of the exchange may trade there.  Brokerage firms contribute specialists who are responsible for all of the trading in a specific stock.  The specialist matches buyers with sellers.  The exchanges are sometimes referred to as an auction market.  In return for the trading services, the specialist charges the buyer an extra fee.  The specialist also counts the volume for the day (the number of shares traded).   

                     
Two Reasons to Trade on an Exchange:

• The company and its shares meet the exchange's listing requirements
  
• The company wants the prestige of having its securities traded in the same place as those of the biggest and best corporations in the country.
  

2.  Roughly 35,000 issues are traded on the over-the-counter (OTC) market and any security may be traded there, but the OTC market is not a formal exchange.  The three main OTCs are the Nasdaq stock market, the Nasdaq SmallCap, and the OTC Bulletin Board.  Brokerages act as market makeers for various stocks.  The brokerages interact over a centralized computer system managed by the Nasdaq, providing liquidity for the market to function.  One firm represents the seller and offers an ask price (the price the seller is asking).  Generally, the listing requirements for stocks to trade OTC are more lenient than those of the exchanges: lower price per share, lower after tax earnings and net worth, fewer outstanding shares.  Overall, the market is one of growth stocks. 

3. The third market refers to trading of exchange-listed securities on the OTC market

4. The fourth market refers to direct trading between investors in exchange-listed securities without the benefit of a broker.  Large institutions that wish to avoid brokerage fees altogether may engage in direct trading.  The fourth market has grown in recent years as big institutional investors have begun using electronic trading networks to step around brokers.