market architecture of selected stock exchanges in ... - Gilles Daniel

39In a dealer or quote driven market, orders displayed are the bid and ask quotations aswell as the quantity of the dealers or market makers on the stock exchange (seeFigure 10).Figure 10: Order Book in a Quote-Driven MarketSource: www.systemics.com/, 27/02/2006In the order book in a quote driven market prices for the bids to buy are on the leftcolumn, and the prices for the asks to sell are in the next column. Sizes are in thethird column, and finally, there are listed nicknames for the traders against someorders.In an order driven continuous market, incoming buy and sell orders are stored in the(limit) order book (see Figure 11). As already stated, there are two main types oforders: market orders and limit orders. Since market orders are executed immediatelyit is mostly the limit orders which are stored in the order book. “If the limit price of anewly arriving buy order exceeds the limit price of a sell order already in the system,the buy order is said to be marketable”(Hasbrouck 2002, p.170) and the orders arematched at the price determined by the limit of the sell order. However, if theincoming order is not marketable, it is added to the order book waiting for execution.Hence, they are said to “provide liquidity to future traders” (Barucci 2003, p.319).