Question

Describe how securities, contracts, and currencies are traded in quote-driven markets, order-driven markets, and brokered markets.

Answer 1

Quote-driven markets:

In the quote-driven markets, customer trade at prices quoted by dealers like commercial banks, investments banks, broker-dealers and trading houses. Quote-driven markets are also called Over-the-Counter (OTC) Markets. Currentcies are traded in the quote-driven markets.

Order-driven markets:

In the order-driven markets, all trade are arranging by match buy orders to sell orders submitted by customers or dealers.Almost all exchanges use order-driven trading systems and every automated trading system is an order-driven system. All securities are traded in order- driven markets.

Brokered Markets:

In the broker markets, Brokers arrange trades among their clients for unique instruments like real estate contract. Trades in the brokered market usually take place between a small number of people or institutions. All contracts are traded in the brokered markets.