Non-Marketable Securities

Written By:
Adiste Mae

What are Non-Marketable Securities?

Non-Marketable Securities are assets that are not easily convertible into cash.

Because of their nature of being non-tradable in a secondary market exchange, non-marketable securities are seldom the object of sale transactions.

And even if a sale happens, it is privately done or sometimes through an over-the-counter sales method.

Holders of such securities have difficulty in selling the same due to some restrictions from the government.

The other type of securities that most investors buy is marketable securities. They are one of the most liquid assets because they are listed and traded in the market. 

Non-Marketable Securities Explained

Examples of Non-Marketable Securities are savings bonds, state and local government securities, private shared federal government series bonds, and rural electrification certificates.

Mostly, these types of securities are debt instruments issued by the government.

Also, these securities restrict the holders from reselling and are required to hold them until their maturity like U.S. savings bonds.

While examples of non-marketable private securities are limited partnership investments, the owner’s shares are not traded publicly and as such, they will not be able to sell them unless they give up their ownership or control in the company.  

Both Marketable and Non-Marketable Securities can be government-issued securities.

The most common examples of Marketable Securities are Treasury Bills and Treasury Bonds which are traded in the US bond market. 

Rationale Behind Non-Marketable Securities

The prohibition of trading Non-Marketable Securities in secondary markets is to keep the value of the investment on such security intact.

When they are sold, it is often done so at a discount from the face value. When it matures, the investor will be able to gain if the security’s purchase price is less than its face value. 

Difference between Marketable Securities and Non-Marketable Securities

Marketable securities are traded easily in the market.

The main difference between the two is that Marketable Securities have a market value or the value at which it changes according to the demands of the security in the market, whereas the value of Non-marketable Securities does not change according to the movement of the market.

Because of these reasons, Marketable Securities expose a higher level of risk. 

While Non-Marketable Securities don’t trade in the secondary market, there is no demand for such securities in the market, which leads to non-marketable securities having no market value although it still has their intrinsic value.

Its intrinsic value can either be its purchase price plus the interest paid or the face value.