Lecture 2 Flashcards
4 types of markets:
- Quote Market
- Order Market
- Broker Market
- Hybrid Market (order with some quote)
In pure quote-driven markets, public traders cannot arrange trades among themselves, true or false
true
In pure quote-driven markets; who supplies the liquidity?
The dealer
In pure quote-driven markets what prices does the dealer quote?
their bid and ask prices
An order driven market is an auction market, true or false?
true
An order driven market where do trader issue all their orders too?
The exchange
Does an order driven market have a dealer?
No
What is the center of an order driven market?
The Trading Rules
A brokered market is where whom arranges trades?
Broker
In brokered markets who initiates the trade?
The sellers who contact the broker
What role does the broker have in brokered markets?
To find counterparties
What items are sold in brokered markets?
item that is unique
2. or items in a time of low liquidity and dealers are unwilling to hold inventories
What is a hybrid market?
mix of both quote-driven markets and order driven markets
what are the most common hybrid market?
those with dealer-specialists
What market is hybrid markets and who operates in them?
order-driven markets in which the specialist must provide liquidity under some circumstances
In the 4 market types how are intentions conveyed and displayed?
Information systems bring information into and out of the market.
List the 4 Information systems that bring information into and out of the market:
- Information Collection Systems
- Information Distribution Systems
- Order Routing Systems
- Order Presentation Systems
Transparent markets report complete information to the public quickly. what 2 kinds of transparency are there:
- Ex ante transparent
* Ex post transparent
what is Ex ante transparent?
before trading you can see the intentions of all traders and all orders
what is Ex post transparent?
a market that will quickly report all trades to the public shortly after they have happened
ASX resolves the opening price using a set of rules –
Principle 1– maximize the volume
Principle 2 – Establishing the minimum surplus
Principle 3 – Ascertaining where the market pressure exists
Principle 4 – Consulting the reference price
