Market Structure

# Market Structure > Exam weight context (sourced from FINRA 2025 Series 7 outline): Market structure topics span Function 1 (Seek Business for the Broker-Dealer, 7% / 9 questions) and Function 3 (Provide Clients with Investment Recommendations and Strategies, 73% / 91 questions). Key rules cited directly in the 2025 outline: SEC Rule 15c6-1 (Settlement Cycle — T+1); FINRA Rules 2269 and 5130 (New Issue / IPO allocation rules); Regulation ATS (Alternative Trading Systems). The exam tests primary vs. secondary market distinction, IPO process, and broker-dealer capacity disclosure. --- ## Primary vs. Secondary Market Understanding where and how securities are created and traded is foundational to the Series 7. Primary market: Where securities are first issued. The company (or government entity) sells newly created securities directly to investors, and the proceeds go to the issuer. An IPO (Initial Public Offering) is a primary market transaction. When Uber went public in 2019 and sold shares to investors for the first time, that was a primary market transaction — Uber received the money. Secondary market: Where previously issued securities trade between investors. When you buy Apple stock on NASDAQ today, Apple receives nothing. You are buying from another investor who already owned those shares. The NYSE and NASDAQ are secondary markets. All day-to-day stock trading occurs in the secondary market. Key distinction: Primary market = issuer gets the money. Secondary market = investors trade among themselves. --- ## NYSE: The Auction Market The New York Stock Exchange (NYSE) is an auction market (also called an agency market). Key features: - Buyers and sellers submit…