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What Are Non-Marketable Securities?
Securities are typically fungible assets, meaning they can be divided, transferred, and traded on financial markets. However, there is a special category known as non-marketable securities, which are subject to significant restrictions on trading.
Unlike regular securities, these instruments cannot be freely bought or sold on major secondary markets. Because of these limitations, finding a buyer or seller can be difficult, and in some cases resale may even be prohibited by law or regulation.
A good example is a U.S. savings bond, which cannot be traded on secondary markets the way standard Treasury bonds can. Another example is shares of a private company, since those shares are not listed on a public stock exchange and therefore cannot be easily traded by investors.
Why Do Investors Buy Non-Marketable Securities?
For many debt instruments in this category, the issuer repays the full face value (par value) when the security reaches maturity. However, if it is possible to sell them before maturity, they often trade at a substantial discount to their par value.
Because of these characteristics, short-term and medium-term traders generally avoid non-marketable securities, focusing instead on assets that can be quickly traded in liquid markets.
For most individual investors, purchasing such securities is rarely attractive unless they can acquire them at a significant discount and plan to hold them until maturity, when the issuer redeems them at full value.