Blind market

economic-dictionary

A blind market is a market that works through intermediaries who present the prices of suppliers and buyers without their having any idea who their counterparts are.

In a blind market, transactions are carried out through intermediaries who present the purchase and sale prices of their clients. Transactions are made through a platform in which the anonymity of the parties is maintained.

Elements of a blind market

In the blind market there are three essential elements:

  • Sellers: There must be organizations or individuals interested in selling something (a good, service or asset).
  • Buyers: Individuals or organizations interested in buying what is offered in the blind market.
  • Intermediaries: They are also called brokers, and they are responsible for presenting the information of the prices and conditions of the transaction to the parties, maintaining the anonymity of the parties
  • Platform: There must be a medium where offers and demands are presented. Currently, an electronic platform is usually used where interested parties act through intermediaries

How the blind market works

Those interested in participating in the blind market agree to quote purchase and sale prices through the platform managed by intermediaries or brokers. The purchase or sale can be made freely through intermediaries, but without it being possible to know the counterpart.

Example use of the blind market in Spain

In the case of Spain, the blind market is usually used in the secondary market for public debt, which is also called the “first step”. In this case, only public debt negotiating agents who agree to quote reduced prices, guaranteeing greater liquidity to the market, can participate.

The rules for the operation of this market are the following:

  • The negotiation is through an electronic platform, without it being possible to know the counterparty.
  • It is only allowed to operate at maturity, in cash or term.
  • Double operations are not allowed.
  • A daily profit and loss settlement is carried out at the current market price and is readjusted at maturity.
  • The minimum amount of operations is 5 million euros.

Usually, this is the most important trading and exchange system in the public debt market.

Tags:  administration other banking 

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