In which type of market do multiple dealers hold an inventory of securities?

The correct answer is the dealer market, where multiple dealers maintain an inventory of securities to facilitate trading. In this market structure, dealers buy and sell securities directly from their own inventory, enabling them to provide liquidity to investors. This means that when investors want to buy a security, they can do so quickly from a dealer who has it in stock, without needing to find a counterparty who wants to sell the same security at the same time. The presence of multiple dealers increases competition and can lead to better prices for investors.

In contrast, the primary market is where new securities are issued directly from companies to investors, and does not involve the holding of securities by dealers. The exchange market, while it can involve trading securities, typically refers to formal exchanges where buying and selling are conducted through an auction process, rather than through dealer inventories. Lastly, the bond market, which specifically deals with the buying and selling of bonds, can operate in various ways, including both dealer and exchange environments, but the defining characteristic of holding inventories applies specifically to the dealer market.