Zusammenfassung der Ressource
Dealers
- Primary Activities
- Quotes: Set prices
and volumes
- Market their services
- Manage their inventory
- Act as intermediary between
investors and exchange
- Methods of attracting order flow
- Quote aggressive prices and sizes
- Reputation for high quality execution
- Advertising
- Cultivating relationships with customers
- Side payment
- Functions
- Supply liquidity
("make a market")
- Trade on their own
account
- Types of dealers
- Scalpers
- Day traders
- Local traders
- Market makers
- Registered traders
- Specialists
- Continuously display
bid-ask quotes
- Quotes posted in limit order book
- Management of book not monopolistic
- Competition with intermediaries
- Provide financial info on
designated stocks
- Principal traders
- Benefits to exchange
- Enhance market quality
- Attract and supply liquidity
- Increase trader profits
from enhanced activity
- Increase investor confidence
- Generates more fees for
exchange
- Make or take pricing
(rebates for order flow)
- Obligations
- Affirmative
- Narrow bid-ask
- Maintain price continuity
(less price volatility)
- Agent for limit order book
- Negative
- Public order precedence rule
- Must yield to public customers first
- Public liquidity preservation principle
- Trades must be inside the spread
- Necessary, but costly
- Minimising dealer's use of limit orders
- Trading Styles
- Passive (spread trader)
- Active (position trader)
- Quote setting
- Where to place bid and offer prices
- The spread between bid and offer
- Narrow or tight
- Wide
- Size of the bid-offer
- Two sided vs one sided
- Firm vs Soft (indicative)