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Summary of the Article The Microstructure of Financial Markets Frank_de_Jong,_Barbara_Rindi
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The Microstructure of Financial MarketsFRANK DE JONG
BARBARA RINDI
1.1 Trading protocol
- 1.1.1 Order-driven markets
o Auction markets
- 1.1.2 Quote-driven markets
- 1.1.3 Hybrid markets
- 1.1.4 Transparency
1.2 Market Structure
, - 1.2.1 Market structures around the world
- 1.2.2 The market structure of the NYSE
- 1.2.3 The Hybrid Market model
1.3 Orders and order properties
- Example 1: Batch opening and closing auction
- Example 2: Limit order book (LOB)
- Example 3: LOB and excess volatility price ranges
1.1.1 Order-driven markets
o Auction markets
- Auction markets
▪ The prevailing type of market in the leading financial centres at present is the auction.
▪ Auction markets can take two forms:
• call markets or
• continuous auctions.
▪ In call (or batch) auctions, orders are submitted simultaneously, whereas in continuous
auctions agents can submit orders at any time during the trading phase.
▪ In auction markets, there are two basic types of order –
• limit orders and
• market orders.
▪ A limit order specifies both a quantity and a maximum price or minimum price for execution
depending on whether it is a buy or a sell order.
▪ A market order only specifies a quantity and will be executed at the best price available.
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