When an individual is awarded an annuity as a result of a lawsuit or winning a state lottery, they often consider selling all or part of their annuity instead of waiting to receive their money. A lump sum payment is an attractive option to someone who needs to use the money to meet expenses, pay for higher education, or even start a business. They can elect to sell a portion or all of their future payments to someone else in exchange for a discounted lump sum payment today. The “resale” of these annuities are Secondary Market Annuities.
A secondary market by definition is the market where investors buy securities or assets from other investors rather than from an issuing company. However the secondary market applies to almost anything including annuities, mortgages, lottery payments, structured settlements, and loans. Investors trade previously-issued securities without the involvement of the issuing companies. For example, if you wish to buy Wal-Mart stock, you are dealing with another investor who owns shares in Wal-Mart. Wal-Mart (the company) is not involved in the transaction in any way.
The secondary market can be further broken down into two categories, the auction market and the dealer market. In an auction market, individuals that want to exchange securities congregate together an announce the price at which they are willing to buy or sell. This is commonly referred to as bid and ask prices. The most common example of an auction market is the New York Stock Exchange. There are auction markets all over the world but none more famous than the NYSE. A dealer market, however, does not require the parties to be in the same location because they are joined together through an electronic network. The most common example of a dealer market is the Nasdaq. In a dealer market, dealers, who are known as “market makers, provide firm bid and ask prices at which they are willing to buy and sell a security. The theory is that competition between dealers will provide the best possible price for investors. Secondary markets can further be broken down into third and fourth markets. These types of markets deal with large volume transactions which are usually between brokers and dealers.
If you need help selling your structured settlement, annuity or lottery payments,
contact us today. We are here to answer your questions and help you obtain the
highest possible price for your payments.
