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Financial advisory
RES5Financial Advisory Services✓Which statements about the differences between the traditional securities market and the OTC derivatives market are CORRECT? (a) The price of an OTC derivatives trade is not necessarily publicly published. (b) Contract terms between two OTC counterparties may not always be documented properly and wholly. (c) An inter-dealer broker trades under the same exchange licence as a broker on a traditional exchange. (d) Retail participation is a larger feature of the OTC derivatives market than of the securities market.
RES 2B 4.1 states that OTC prices are not necessarily published, and 4.1.1 states that OTC contracts are mostly privately negotiated and may not always be documented properly and wholly. An exchange broker holds a licence to trade within the exchange; an inter-dealer broker facilitates trades between major dealers off exchange. The OTC market has more sophisticated and institutional players and little retail participation.
Statement (d) reverses the clientele point: retail traders are the exchange market's feature, not the OTC market's.
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