here’s a little game (i ALWAYS f these up)- tell me if the characteristic belongs to price driven or order driven markets: example: nikkei, dax, and paris bourse are- ORDER DRIVEN let’s see how you do: has central order book: minimal human intervention: lack of depth in market: dealer provides a free option when a firm quote is posted: competition among market makers promotes best price: lower cost: easier to execute block trades: alright team, see how you do and feel free to add any. i miss these time and time again and i just need to hammer them in to win an easy point.
bannisja Wrote: ------------------------------------------------------- > here’s a little game (i ALWAYS f these up)- tell > me if the characteristic belongs to price driven > or order driven markets: > > example: nikkei, dax, and paris bourse are- > ORDER DRIVEN > > let’s see how you do: > > has central order book: Order > minimal human intervention: Order > lack of depth in market: Order > dealer provides a free option when a firm quote is > posted: Price > competition among market makers promotes best > price: Price > lower cost: Order > easier to execute block trades: Price > alright team, see how you do and feel free to add > any. i miss these time and time again and i just > need to hammer them in to win an easy point.
Yuck I’m not a fan of these but here goes. has central order book: order driven minimal human intervention: order driven lack of depth in market: order driven dealer provides a free option when a firm quote is posted: ??? price driven ??? competition among market makers promotes best price: price driven lower cost: order driven easier to execute block trades: not sure… I’m going to guess price driven due to more depth Thanks for the game 
Well done, guys! Only one thing’s missing: anonymity. To this day I’m still not sure which one offers more and why. Does order-driven offer less because of the central order book?
alright, lets give it a shot… has central order book: order driven minimal human intervention: order driven lack of depth in market: ? dealer provides a free option when a firm quote is posted: ? competition among market makers promotes best price: ? lower cost: good question… interactivebrokers.com I’d say… lol… easier to execute block trades: price driven
Price driven offers the anonymity, large blocks take place between you and the market maker without blowing your cover, whereas, in order driven, everyone can see your block hanging out to dry in the markets.
order driven would be more i’d think b/c you can’t see depth of book, no?
hk Wrote: ------------------------------------------------------- > Well done, guys! Only one thing’s missing: > anonymity. To this day I’m still not sure which > one offers more and why. Does order-driven offer > less because of the central order book? It’s the opposite, order-driven provides more anonymity. I have never really understood why, but the way I remember it is that there is little intervention in the order-driven market, it is done by computer. So no “market makers” = more anonymity.
has central order book: ORDER minimal human intervention: ORDER lack of depth in market: ORDER dealer provides a free option when a firm quote is posted: PRICE competition among market makers promotes best price: PRICE lower cost: ORDER easier to execute block trades: PRICE nice job.
Black Swan Wrote: ------------------------------------------------------- > Price driven offers the anonymity, large blocks > take place between you and the market maker > without blowing your cover, whereas, in order > driven, everyone can see your block hanging out to > dry in the markets. This is incorrect. I looked it up to be sure. Page 26 and 27 of book 4. “Order driven markets function as electronic order-driven systems in which all transactions flow through a computer” Under “disadvantages” of a price-driven market: “Market maker does not know what trades will be generated when posting a quote, which reduces the anonymity of the trade.”
yeah, just think if you had an order to buy like 100k shares of stock and you’re a penny or 2 off market- open up a level 2 book and the world can see your order. granted, in today’s real world of everything computer, tons of programs and minimum lot show stuff, it’s probably a stupid outdated list we have going here, but whatever. for CFA-ville order driven = you gots your privacy. just you and the central limit book… cozy… bottle of wine… candles… i dunno.
Not by CFAI text, Book 4, P.51 “Any automated tradign system exposes one party to transparency risk, it forces one side ofe the transaction to expose itself first and, therefore, run the risk of being ‘picked off.’”
It occured to me that we are looking at annoymity from different sides, and the book states the same thing, price driven, the market makers (dealers) are exposed to transparency risk while in order driven, traders with large blocks are exposed, that is because it is not just you and the order book as everyone can see the order book.
Nice point BS. I remember reading that too way back when but didn’t even think about it. I suppose the difference between transparency versus anonymity is just another pointless CFAism to remember.
yet not clear to me: e.g. what is the NYSE and what do we mean by order-book in this context? I mean, the NYSE has: - Market on open/close orders (auctions) - specialists - NYSE orderbook = market depth to see liquidity of the specialist. Nasdaq: - ECN’s like ARCA, BRUT, ISLD, … (would this not be classified as an orderbook, just because we have independent market makers, which post their spreads…?) - market makers sometimes we’re talking “transparency”… THERE IS NO SUCH THING imho. Even the EUREX has ICEBERG orders, which are basically refreshing orders… i’ve seen the ARCA bid refresh thousands of times… what the heck is this outdated material? This topic is a mess.
I don’t see an issue with material, I disagree with you on the transparency point. If you can see large orders sitting out there, it serves as a very transparent signal, as to where several of the large traders stand whereas in a price driven market, that order would have cleared with the market maker and in the event that it did not, it would not be disclosed to the public. The NYSE is known as a hybrid market, combining elements of both. NASDAQ is considered price driven.
bannisja Wrote: ------------------------------------------------------- > has central order book: ORDER > minimal human intervention: ORDER > lack of depth in market: ORDER > dealer provides a free option when a firm quote is > posted: PRICE > competition among market makers promotes best > price: PRICE > lower cost: ORDER > easier to execute block trades: PRICE > > nice job. Nice and thank you! I’m making an index card out of your post!!
This is gay but it’s how I remember it: Price-driven: P for price driven, P for PEOPLE: i.e. dealers involved, market makers, competition If machines ran the world there’d be ORDER: Order driven markets: minimal human intervention, low cost, lack of depth
Top tip, thanks Smarshy
And yeah it is a bit gay!