- CFA Exams
- CFA Level I Exam
- Topic 5. Equity Investments
- Learning Module 1. Market Organization and Structure
- Subject 3. Financial Intermediaries
CFA Practice Question
A major difference between an OTC market and an exchange is the ______.
B. transactions costs
C. degree of liquidity
D. None of the above
A. degree of automation of trades
B. transactions costs
C. degree of liquidity
D. None of the above
Correct Answer: D
Exchange markets and OTC markets compete effectively with each other and neither market form dominates the other. Therefore, they are competitive in each of these factors. Each has implemented technology differently, but both are highly automated. Transaction costs are competitive between them, and liquidity can be very high in both markets.
User Contributed Comments 7
| User | Comment |
|---|---|
| achu | "liquidity CAN be very high in both markets." I guess b/c of the word CAN, C is true. Seems like in practice there are more low liquidity items found in OTC than NYSE. But the question says ANY exchange, not the nyse. |
| sergashev | mmm, because of word CAN, C is not correct. Generally, the stock which is liquid on NYSE will be also liquid on OTC. |
| johntan1979 | Does anyone else see "CAN" in the answer choice C? |
| farhan92 | still trying to find it.. |
| Inaganti6 | how are you talking about things that you cant even see maybe you're over studying |
| davidkhang | This is getting ridiculous now... |
| maryprz14 | maybe achu is talking about trash CAN...lol (sorry just joking) |