Which of the following markets does NOT provide price discovery? A) Electronic crossing networks. B) Electronic limit-order markets. C) Auction markets.
B?
A?
A. ECNs cross at an average of the bid/ask prices, so no price discovery. Think of the other two like eBay - both are auction based so buyers will determine the proper price.
A. ECN = electronic communication networks , not crossing networks, according to CFA if I remember correctly. Also, ECN has lower cost and lower commissions due to lack of dealers and brokers.
A. Electronic Crossing Network
yeah answer is definitely A… also sparty is right, ECN does not stand for electronic crossing network, I always mix up the 2…
I confused myself again too. I meant to say crossing networks have lower costs and commissions not ECNs.