Trading Flashcards
Two types of systems
- Order Driven System
- Quote Driven System
Order Driven designed for
Liquid Securities
- More likely to achieve fairer price
Quote Driven designed for
Illiquid Securities
- Rely market markets to quote prices
- guaranteed liquidity from Market Makers , not always price
Order Driven Features
Negotiated prices
Electronic trading
Examples
Tokyo Stock Exchange
LSE’s SETS
Quote Driven Features
Market Makers (Price Makers)
Bid/Offer Spreads
Screen and phone - based
Examples
Nasdaq
LSE SEAQs
SETS + SEAQ
SEAQ = Quote Driven
Shares of FTSE ALL Shares
Order driven system
SEAQ is
Price Information service
What traded on SETS
Order driven system
FTSE All share InDex
Some euro dominated Irish securities
ETFs
Once SETS traded completed
- Transaction published immediately
Prioritising orders on SETS order book
- Price then Time (size not considered for priority)
Best price on SETS
Highest BID
Lowest Offer
SEAQ
Stock exchange automated quotation
Quote Driven System
- Market Makers
- Listed securities not on SETSqx
- Fixed Interest Securities + AIM stocks not on LSE
SETSqx
Hybrid system for domestic listed securities
not listed on SETS
Combines market marker support + 5 periods auctions
Book Entry Transfer
Changing electronic records of ownership rather than issuing new share certificate
Multilateral Trading Facilites
Allows electronic trading of securities listed on exchange such as LSE
