Non-Marketable Securities: Understanding Their Definition and Examples

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A non-marketable security is a financial instrument that cannot be freely bought and sold on a secondary market such as a stock exchange or the over-the-counter bond market. You acquire it from the issuer or through a private arrangement, and you usually exit by redeeming it with the issuer or holding it to maturity rather than selling it to another investor. U.S. savings bonds are the textbook example. Private company shares and limited partnership interests are common examples outside government debt.

How non-marketable securities work

A marketable security changes hands between investors after issuance, and its price moves with supply and demand without the issuer’s involvement. A non-marketable security breaks that chain: ownership is registered to a specific holder, transfer is prohibited or impractical, and the only reliable way to turn it into cash is a transaction with the issuer.

For government savings bonds, this is written into the terms. A Series EE or Series I bond is registered in the owner’s name and cannot be sold, transferred to another investor or used as collateral for a loan. The owner can only cash it in with the Treasury, subject to holding rules: I bonds and current EE bonds cannot be redeemed in the first 12 months, and redeeming before five years forfeits the last three months of interest.

Private shares work differently. Nothing may forbid a sale, but there is no exchange listing, no market maker and often a shareholder agreement that restricts who can buy. Selling means finding a buyer yourself and agreeing on a price, which can take months.

Common types of non-marketable securities

• U.S. savings bonds (Series EE and Series I), sold to individuals and redeemable only with the Treasury.
• Other federal non-marketable Treasury securities, such as the Government Account Series held by federal trust funds and the State and Local Government Series (SLGS) sold to state and local issuers.
• Rural electrification certificates and similar special-purpose government obligations.
• Shares in privately held companies, including founder stock and stakes held by venture capital investors before any public listing.
• Limited partnership interests, which typically require the general partner’s consent to transfer.

The same government can issue both kinds. The U.S. Treasury’s bills, notes and bonds are marketable and trade actively in the bond market, while its savings bonds are not.

Why issuers make securities non-marketable

The main reason is stable ownership of the money raised: the issuer knows who owns its debt and roughly when it will be repaid. Savings bonds were designed to draw household savings into government borrowing without exposing small savers to bond market price swings. SLGS let state and local governments park bond proceeds under federal tax rules without trading them.

For private companies, the motive is control. Owners want to decide who becomes a shareholder, so transfer limits are deliberate.

How value is measured without a market price

With nothing trading, a non-marketable security has no market value in the usual sense. Its value is defined by the issuer’s obligation. Depending on structure, that is either:

1. Face value at maturity, for securities sold at a discount, or
2. Purchase price plus accrued interest, for securities that grow over time.

Hypothetical example: An investor buys a non-marketable discount bond for $800 that pays $1,000 at maturity in 10 years. The gain is $200, or 25% of the purchase price. At year 4 its value is not a market quote but whatever redemption value the terms assign at that date. To compare the return with a marketable bond, convert it to an annual rate using yield to maturity or CAGR.

Series EE bonds show the structure in practice: the Treasury guarantees that a bond held 20 years will be worth at least twice its purchase price, regardless of interest rate moves in the meantime.

Private shares are harder. With no redemption schedule, they are valued by appraisal, recent funding rounds or formulas in a shareholder agreement, and the figure is an estimate rather than a price anyone has paid.

Marketable vs. non-marketable securities

The difference in risk is specific. A marketable bond sold before maturity can fetch less than you paid if rates have risen, while a savings bond’s redemption value is set by its terms. That does not make all non-marketable securities lower risk overall: private shares can lose their entire value while you are unable to sell.

Limitations

• Liquidity: cash is available only on the issuer’s schedule or through a slow private sale, and money committed cannot be moved quickly if better uses appear.
• Early-exit and collateral limits: savings bonds carry the holding rules, interest penalty and pledging ban described above.
• Valuation uncertainty: for private holdings, reported value can differ sharply from what a buyer would actually pay.

Distinctions readers confuse

Non-marketable vs. illiquid. A thinly traded small-cap stock is illiquid but still marketable, because a market exists. Non-marketable means no market at all.

Non-marketable vs. restricted securities. Restricted stock acquired in a private placement cannot be resold freely for a holding period, but it often becomes marketable afterward. “Not yet marketable” describes that temporary state.

Non-marketable vs. accounting “marketable securities.” On a balance sheet, marketable securities are short-term investments that can be sold quickly. That is a classification of liquidity, not a description of the security’s legal terms.

FAQs

The Bottom Line

Savers holding savings bonds and investors with private shares or partnership stakes should treat that money as committed until the issuer's schedule allows an exit. Government redeemable issues shield holders from price swings before maturity. Private holdings rely on estimated values and slow negotiated sales, and they can lose their entire value while the owner cannot sell.