Also, bond futures, and some types of bond options, are traded on exchanges. But the overwhelming majority of bonds do not trade on exchanges. While investors can trade marketable bonds among themselves whenever they want, trading is usually done with bond dealers, more specifically, the bond trading desks of major investment dealers. The dealers occupy centre stage in the vast network of telephone and computer links that connect the interested players. What this means is that the dealer has traders whose responsibility is to know all about a group of bonds and to be prepared to quote a price to buy or sell them.
Dealers also buy and sell amongst themselves, either directly or anonymously via bond brokers.
The name of the trading game is to take a spread between the price the bonds are bought at and the price they are sold at. The major bond investors are financial institutions, pension funds, mutual funds and governments, from around the world. The following review of terminology is from the point of view of a bond trader. Coupon The percentage interest to be paid on a bond in the course of a year. The interest is usually payable semi-annually, although it can also be payable monthly, quarterly, and annually.