The New York Stock Exchange and American Stock Exchange, despite their names, also list a large number of bonds. Their bond rooms are the scene of the same kind of brisk auction-style trading that occurs on the stock-trading floor.
Most bonds that have already been issued are traded
over the counter
(OTC) — a term that really means over the phone. Bond dealers across the country are connected via electronic display terminals that give them the latest information on bond prices. A broker buying a bond communicates electronically to find out which dealer
is currently offering the best price and calls that dealer to negotiate.
Brokerages also have inventories of bonds that they want to sell to clients looking for bonds of particular maturities or yields. Sometimes investors pay less by buying bonds brokers already own or make a market in as opposed to bonds the brokers have to buy from another brokerage firm.
