Non-Marketable Security

A non-marketable security is a type of security that cannot be easily traded on a public market. This is because the security does not have a readily available market, or the trading volume of the security is so low that it is not commercially feasible to trade.

Examples of non-marketable securities:

• Private company securities
• Company stock with very low trading volume
• Corporate debt securities
• Government securities not traded on a public market
• Derivatives that are not traded on a public market

Characteristics of non-marketable securities:

• Low liquidity: Non-marketable securities have low liquidity, which means that they are difficult to sell or buy.
• Lack of marketability: Non-marketable securities do not have a readily available market, which makes them difficult to trade.
• Lack of standardization: Non-marketable securities are often not standardized, which means that they can be difficult to compare to other securities.
• High transaction costs: Trading non-marketable securities can often be more expensive than trading marketable securities.

Factors that make a security non-marketable:

• Low trading volume: If a security has very low trading volume, it is not likely to be marketable.
• Lack of interest: If there is not enough interest in a security for it to be marketable, it will not be.
• Regulation: Some securities are regulated by government agencies, which makes them difficult to trade.
• Corporate structure: Some securities have complex corporate structures, which can make them difficult to trade.

Non-marketable securities can be used in a variety of investment strategies, such as portfolio hedging, speculation, and hedging. However, they are not typically used as primary investment vehicles.