Investments, tenth edition

  Brokered Markets   

The next level of organization is a  brokered market.  In markets 

where trading in a good is active, brokers find it profitable to offer search services to buyers 

and sellers. A good example is the real estate market, where economies of scale in searches 

for available homes and for prospective buyers make it worthwhile for participants to pay 

brokers to help them conduct the searches. Brokers in particular markets develop special-

ized knowledge on valuing assets traded in that market. 

 Notice that the  primary market,  where new issues of securities are offered to the public, 

is an example of a brokered market. In the primary market, investment bankers who market 

a firm’s securities to the public act as brokers; they seek investors to purchase securities 

directly from the issuing corporation.