Journal article
The ecology of an order-driven market
Journal of portfolio management, Vol.24(2), pp.47-55
01/01/1998
DOI: 10.3905/jpm.24.2.47
Abstract
A securities market is order-driven if the limit orders of some public participants establish the prices at which others can trade by market order at any time when the market is open. A study considers how, without market maker intermediation, a population of public investors separates into limit order and market order traders, and how the order-driven market achieves an ecological balance between the suppliers and the demanders of immediacy. The study also explains why a bid-ask spread is a natural property of an order-driven market, even when the market comprises a large number of participants. A stylized environment that enables the optimal bid and ask quotes to be solved for, and the bid-ask spread to be analyzed, is considered. Empirical evidence is summarized concerning price determination in the order-driven market, and implications for market structure are discussed.
Details
- Title: Subtitle
- The ecology of an order-driven market
- Creators
- Puneet Handa - University of IowaRobert Schwartz - Baruch CollegeAshish Tiwari - University of Iowa
- Resource Type
- Journal article
- Publication Details
- Journal of portfolio management, Vol.24(2), pp.47-55
- Publisher
- Pageant Media
- DOI
- 10.3905/jpm.24.2.47
- ISSN
- 0095-4918
- eISSN
- 2168-8656
- Language
- English
- Date published
- 01/01/1998
- Academic Unit
- Finance
- Record Identifier
- 9984380458502771
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