Zusammenfassung der Ressource
Orders and Market Execution
- Order types
- Limit orders
- Specifies a maximum/minimum price
- Market orders
- Large orders may cause market impact
- Execution price uncertainty
- Marketable limit orders
- Marketable
- At the market
- Behind the market
- Standing limit orders
- "options" that offer liquidity
- Stop loss orders
- Destabilise prices by demanding
liquidity when least available
- Order activated when price rises/falls to stop price
- Tick Sensitive Orders
- Conditional on last price change
- Market-not-held orders
- Best possible execution decided by broker
- Market Execution Structures
- Quote-driven dealer markets
- Posts quotes to buy or sell where
ask price>bid price
- Dealer profits from bid-ask spread
- Examples: NASDAQ, FX, Bonds, Derivatives
- Order driven markets
- Use trading rules to arrange
trades
- Oral auctions
- Open-outcry trading floors
- Physical location
- Easier to enforce rules
- Rules: best bid/offer price accepted, first
in first served, public orders first
- Single price auctions
- Uniform price used (uncertainty about
true value of stock)
- Fair to both informed and uninformed investors
- For very illiquid stocks
- For insufficient technology
- Rules: uniform pricing (clearing price where supply=demand)
- Continuous electronic auctions
- Limit order book with bid and ask
schedules for certain price and
quantity
- Investors submit orders with brokers who act as
intermediary
Anlagen:
- Rule: price and time precedence,
discriminatory pricing, matching procedure
- Crossing networks
- Match buy and sell orders without
knowing public quotes
- OR Place orders anonymously so
no-one knows who's trading
- Rule: derivative pricing rule
- But, can lead to stale prices, adverse selection
- Tempts traders into price manipulation
- Classification based on liquidity
provision and frequency of
trading
- Brokered Markets
- Broker's role in finding liquidity
- Hybrid/multiple markets
- Mix characteristics of quote driven, order
driven and brokered markets
- NYSE
- Floor traders (order driven)
- Electronic limit order book (order driven)
- Designated dealer to provide liquidity (quote driven)