Which of the following markets does NOT provide price discovery? A) Electronic limit-order markets. B) Auction markets. C) Electronic crossing networks.
The answer is C, but i can’t actually remember why…
I know the orders are batched together and traded at fixed times during the day. Presumably that doesnt allow for buyer/sellers to agree and negotiate a price.
Franki…i think i will have to review the q bank as well…
Electronic crossing networks will generally execute at the mid point of the bid-ask.
The other two types have traders competing for the best prices, so that results in price discovery based on market demand. Crossing networks use primary market quoted prices.
Yes, C.
Kaplan explanation fyi.
In an electronic crossing network, there is no price discovery because trades are executed at the average of the bid and ask quotes. The trader usually does not know the identity of their counterparty or of their trade size. In an auction market and automated auctions (also known as electronic limit-order markets), orders compete for execution and provide price discovery.