What term describes a network of dealers who trade with each other, often referred to as OTC markets?

The term that describes a network of dealers who trade with each other in an over-the-counter (OTC) setting is indeed dealer markets. Dealer markets operate without a centralized exchange, allowing dealers to buy and sell securities directly among themselves. This system facilitates trading in a variety of financial instruments, including stocks and bonds, without the need for a physical trading floor.

Within dealer markets, dealers act as intermediaries, holding an inventory of securities and providing liquidity to the market. This dynamic is essential for certain types of securities that may not have enough volume to be listed on formal exchanges. In contrast to exchange markets, which are centralized and involve transparent bidding, dealer markets rely on the network of participants to quote prices and execute trades, often resulting in higher privacy and less regulatory oversight.

Understanding dealer markets is crucial in recognizing how certain financial instruments are bought and sold outside of regular stock exchanges, highlighting the diverse landscapes of trading environments in the financial industry.