The global securities market has been constantly evolving over the years to better serve the needs of traders and investors alike. Traders require liquid markets with minimal transaction and delay costs in addition to 澳洲幸运5开奖号码历史查询:transparency and assured completion of the transaction. Based on these core requirements, a handful of securities market structures ♋have become the dominant trade execution structures in the world.

Quote-Driven Markets

Quote-driven markets are electronic stock exchange systems where buyers and sellers engage in transactions with designated 澳洲幸运5开奖号码历史查询:market makers or dealers. This structure only posts the bid and ask quot🗹es for specific stocks dealers are willing to trade.

In a purely quote-driven market structure, traders must interact directly with dealers, who supply liquidity in the market. That's why this structure is well-suited for illiquid markets. Dealers can provide liquidity to securities by maintaining an inventory of those that are thinly traded or trade at low volumes. By providing liquidity, dealers make money from the spread between the bid and ask quotes. To generate profits, they try to buy low at the bid and sell high at the ask, and have high turnover.

Because dealers need to meet the bid and ask prices they quote, order execution on trades is guaranteed. Some dealers may refuse to make trades, however, as they may only work with �♚�special clients like institutional ones.

This market structure is commonly found in 澳洲幸运5开奖号码历史查询:over-the-counter (OTC) markets such as 澳洲幸运5开奖号码历史查询:bond markets, the 澳洲幸运5开奖号码历史查询:forex market, and some 澳洲幸运5开奖号码历史查询:equity markets. The Nasdaq and London SEAQ (Stock Exchange Automated Quotation) are two examples of equity markets which have roots in a quote-driven market structure. The Nasdaq structure, it is worth noting, also contains 澳洲幸运5开奖号码历史查询:aspects of an order-driven market.

Quote-driven markets are also called 澳洲幸运5开奖号码历史查询:dealer markets or price-driven markets.

Order-Driven Markets

In 澳洲幸运5开奖号码历史查询:order driven markets, buyers and sellers post the prices and amounts of the securities they wish to tr♌ade by themselves rathꦓer than through a middleman like a quote-driven market.

Most order-driven markets are based on an auction process, where buyers are looking for the lowest prices and sellers are looking for the highest prices. A match between these two parties results in a trade execution. Order execution in this market structure is not guaranteed as traders are not required to meet the bid or ask prices they quote. 澳洲幸运5开奖号码历史查询:Price discovery is determined by the 澳洲幸运5开奖号码历史查询:limit order of traders in the particular security.

There are two main types of order-driven markets, a 澳洲幸运5开奖号码历史查询:call auction, and a continuous 澳洲幸运5开奖号码历史查询:auction market. In a call auction market, orders are collected during the day and at specified times an auction t🌄akes place to determine the price. A continuous market, though, operates continuously during trading hours with trades executed whenever a buy and sell order match up.

The biggest benefit of an order-driven market in 澳洲幸运5开奖号码历史查询:liquid markets is the large number of traders willing to buy and sell securities. The larger the number of traders in a market, the more competitive the prices become. This theoretically translates into better prices for traders. Transparency is also a big benefit because investors have access to the entire 澳洲幸运5开奖号码历史查询:order book. This is the electronic list of buy and sell orders for a specific security. The one major downfall with this structur⛄e is that liquidiꦿty can be poor in securities with few traders.

The 澳洲幸运5开奖号码历史查询:Toronto Stock Exchange (TSX) in Canada is one example of an order-driven mar꧙ket.

Hybrid Markets

The third market structure we explore in this list is the 澳洲幸运5开奖号码历史查询:hybrid market, also known as a mixed-market structure. It combines features from both a quote-driven market and an order-driven market, blending together a traditional 澳洲幸运5开奖号码历史查询:floor broker system with an electronic 澳洲幸运5开奖号码历史查询:trading platform — the latter being much faster. 

The choice is up to investors how they do business and place their trade orders. Choosing the automated electronic system means much faster♍ trades which can take less ♍than a second to complete. Broker-initiated trades from the trading floor, though, can take longer — sometimes as long as nine seconds.

The 澳洲幸运5开奖号码历史查询:New York Stock Exchange (NYSE) is one of the world's leading hybrid markets. Originally an exchange that allowed human brokers to make trades manually on the trading floor, it moved beyond that after 2007, allowing the majority of stocks to be traded electronically. Brokers can still make trades manually, but the majority of trades today are executed through the exchange's electronic systems. The NYSE also continues to use d🐻ealers to provide liquidity, in the event of low liquidity periods.

Brokered Markets

The final market structure we'll look at in this article is the 澳洲幸运5开奖号码历史查询:brokered market. In this market, brokers or agents act as middlemen to find buyers or 澳洲幸运5开奖号码历史查询:counterparties for a transaction. This market usually requires the broker to have some degree of expertise in or💎der to complete the s𝓀ale or trade.

When a client asks their broker to fill an order, the broker will search their network for a suitable trading partner. Brokered markets are often only used for securities with no public market such as unique or illiquid securities, or both. Common uses of the brokered markets are for large 澳洲幸运5开奖号码历史查询:block trades in bonds or illiquid stocks.

The direct 澳洲幸运5开奖号码历史查询:real estate market is also a good example of a brokered market. This market contains assets relatively unique and illiquid. Clients generally require the assistance of real estate brokers to find buyers for their home. In these markets, a dealer wouldn't be able to hold an inventory of the asset, like in a quote-driven market, and the illiquidity and low freℱquency of transactions in the market would make♏ an order-driven market infeasible, as well.

The Bottom Line

There are different types of market structures simply because traders and investors have different needs. The type of market structure can be very important in determining the overall 澳洲幸运5开奖号码历史查询:transaction costs of a large trade. It can also affect the profitability of a trade. In addition, if you are developing 澳洲幸运5开奖号码历史查询:trading strategies, sometimes the strategy may not work well across all market structures. Knowledge of t🐻hese different market structures can help you determine the best 🍌market for your trades.

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