Dealer markets are financial markets where securities transactions are executed through dealers rather than directly between buyers and sellers. In these markets, dealers act as market makers, holding inventories of securities and quoting buy (bid) and sell (ask) prices. They facilitate trading by providing liquidity, ensuring transactions occur even when there is no immediate match between buyers and sellers.

Key Characteristics:
1. Decentralized Structure: Dealer markets operate over-the-counter (OTC), meaning there is no centralized exchange like the New York Stock Exchange (NYSE). Instead, transactions occur through electronic networks or direct communication.

2. Market Makers: Dealers profit from the bid-ask spread, the difference between the prices at which they buy and sell securities. They assume the risk of holding securities in inventory.

3. Wide Asset Range: Dealer markets are common for bonds, foreign exchange, and derivatives, as well as smaller stocks not listed on major exchanges.

4. Price Transparency: Prices in dealer markets may vary as they depend on the dealer’s inventory and strategy, making these markets less transparent compared to centralized exchanges.

Examples of dealer markets include the NASDAQ stock market and most bond and forex markets. These markets play a critical role in global finance by improving liquidity and enabling efficient price discovery.