market architecture of selected stock exchanges in ... - Gilles Daniel
market architecture of selected stock exchanges in ... - Gilles Daniel
market architecture of selected stock exchanges in ... - Gilles Daniel
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263.2 Open<strong>in</strong>g Hours and Trad<strong>in</strong>g DaysIn the respective section analyz<strong>in</strong>g the <strong>selected</strong> <strong>stock</strong> <strong>exchanges</strong> (Chapter 4), theopen<strong>in</strong>g or trad<strong>in</strong>g hours and trad<strong>in</strong>g days will be presented.3.3 Types <strong>of</strong> Market StructureMarkets make the exchange <strong>of</strong> securities among <strong>in</strong>vestors possible. Accord<strong>in</strong>g toGarbade (1982), <strong>market</strong>s, <strong>in</strong> which securities are traded may be categorizedcorrespond<strong>in</strong>g to how <strong>in</strong>vestors have to seek out compatible trad<strong>in</strong>g partners. Thereare five types <strong>of</strong> <strong>market</strong> structure: Direct search <strong>market</strong>s• Brokered <strong>market</strong>s• Dealer <strong>market</strong>s• Auction <strong>market</strong>s• Hybrid <strong>market</strong>s.Mov<strong>in</strong>g from direct search <strong>market</strong>s to brokered <strong>market</strong>s, dealer <strong>market</strong>s and auction<strong>market</strong>s fixed costs for regulations and physical trad<strong>in</strong>g facilities <strong>in</strong>crease, the costsper trade decrease, and the structural prerequisites <strong>in</strong>crease.3.3.1 Direct Search MarketsSecurities traded <strong>in</strong> direct search <strong>market</strong>s are usually bought and sold so <strong>in</strong>frequentlythat no broker or dealer has an <strong>in</strong>centive to provide any k<strong>in</strong>d <strong>of</strong> service to facilitatetrad<strong>in</strong>g. Hence, buyers and sellers must search a trad<strong>in</strong>g partner among all possiblepartners for the best possible price. This implies the probability that at the same timea trade has been agreed upon, a better price could have been possible with anotherpartner. Furthermore and due to the same circumstance, trades can occur at the sametime for the same securities at different prices (Garbade 1982).