CandleFocus

Non-Marketable Security

Candlefocus Editor
Non-marketable securities are an important part of the financial markets. Generally, these are investments that are not publicly traded on a major exchange and thus, cannot be easily bought and sold like stocks and bonds. Instead, these investments are typically traded over-the-counter (OTC).

Non-marketable securities often include debt instruments, such as Treasury bonds and corporate bonds, as well as non-marketable stocks, shares in limited partnerships, and complex derivatives. Non-marketable securities are more illiquid than marketable securities, meaning they cannot be easily converted into cash without incurring substantial transaction costs.

The key difference between non-marketable and marketable securities lies in their liquidity. Non-marketable securities are difficult and costly to convert into cash due to their lack of a well-defined and diversified trading market. However, these securities generally offer higher returns as investors are compensated for the added illiquidity risk.

In terms of regulatory oversight, non-marketable securities must comply with the same set of laws and regulations as those that protect the public markets. These laws are designed to protect smaller investors from risky investments, prevent fraud and other manipulation of security prices, and ensure fair and orderly markets.

Investors interested in non-marketable securities should consider the cost and time necessary for transactions before investing in these assets. While non-marketable securities can offer higher returns, these are accompanied by higher risks and costs, making them a viable option only for certain types of investors who are aware of the details of these investments and accept the risks involved.

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