Answer: quote-driven market.

## Explanation A **quote-driven market** (also known as a dealer market) is characterized by dealers who post bid and ask prices at which they are willing to buy and sell securities. In this type of market: 1. **Dealers act as market makers** - They maintain an inventory of securities and provide liquidity by standing ready to buy and sell. 2. **Trading occurs directly with dealers** - Buyers and sellers transact with dealers rather than with each other. 3. **Price discovery comes from dealer quotes** - Prices are determined by the bid-ask spreads quoted by dealers. **Why the other options are incorrect:** - **A. Brokered market**: In a brokered market, brokers act as intermediaries to find counterparties for trades. Buyers and sellers don't trade directly with dealers, but rather brokers help match orders between parties. - **B. Order-driven market**: In an order-driven market, buy and sell orders are matched through an electronic order book or auction system. Prices are determined by the interaction of these orders, not by dealer quotes. **Examples of quote-driven markets**: - Over-the-counter (OTC) markets - NASDAQ (historically a dealer market, though it has evolved) - Foreign exchange markets (interbank market) **Key characteristics**: - Dealers provide continuous liquidity - Bid-ask spreads represent the dealer's profit margin - Less transparent than order-driven markets - Better for less liquid securities where continuous trading might not be possible

Author: LeetQuiz .