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

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343.6 Orders and Order Books3.6.1 Types of OrdersA trader gives an order to a broker who, as the trader’s agent, passes the order to asecurities institution where a trade may be arranged. In order to inform the brokerexactly about the investor’s intention and to be able to implement various investmentstrategies, the investor has to specify his order. He has to tell him the exact numberof shares, if these shares are to be bought or sold and how he should handle the orderin the market. To facilitate trading and to reduce the risk of misunderstanding thereare several standardized types of orders available on stock exchanges.In general, there are two types of orders: orders with a price limit and orders withouta price limit. These order types can be further specified through additional executionconditions, validity constraints and trading restrictions. Since the availability of ordertypes vary on the respective stock exchanges the table listed below shows how ordersare characterized and will be illustrated (where applicable) in the chapter coveringthe stock exchanges in detail.Table 13: Order Types – Execution Conditions (general)Orders types Acronym Execution condition Trading PhaseNoneOrders w/oPrice LimitMarketOrderFill or KillOrders with aPrice LimitLimit OrderExecute andEliminateNoneFill or KillExecute andEliminateTable 14: Order Types – Validity Constraint (general)Orders types Acronym Validity constraints Trading PhaseNoneOrders w/o MarketGFDOrderPrice LimitGTCOrders with aPrice LimitLimit OrderNoneGFDGTC
35Orders without Price LimitMarket orders are unpriced buy or sell orders. They are to be executed at market thatis at the best price available, namely at the lowest ask posted by sellers, or thehighest bid price posted by buyers (Beiner and Schwartz 2001). Hence, marketorders guarantee immediacy of execution with no certainty of the price.Orders with a Price LimitLimit orders are to be executed at their specified limit or better. A limit buy ordersets the maximum price at which the trader will buy; a limit sell order sets theminimum price at which the trader will sell (Beiner and Schwartz 2001).Limit orders that do not execute are held on the market by being entered in a limitorder book. They remain active on the book until they execute, are cancelled by theclient or expire (Schwartz 1988).AcronymThe different stock exchanges may use acronyms for ease of communication andprevention of confusion in trading.Execution conditionThere are several possibilities to specify an order. Execution conditions specify whatexactly happens between order entry and after execution. In general, they can bedefined as persistent or non-persistent. Orders without any execution constraint willexecute as far as possible and add the remainder to the order book where they waitfor execution or cancellation. These orders are described to be persistent. Orderswith execution constraint are described as non-persistent since they never reside inthe order book:“Execute and Eliminate” (or “Immediate and Cancel”, “Fill and Kill”) orders arematched immediately and as fully as possible upon entry into the order book. Theremaining unexecuted volume is deleted from the order.“Fill or Kill” (or “Immediate or Cancel”) orders are either matched immediately andcompletely or, if full execution is not possible, the entire order is rejected from theorder book without any partial execution. Fill or Kill orders are another example ofnon-persistent orders and never reside on the order book.
Page 1 and 2: MARKET ARCHITECTURE OF SELECTED STO
Page 3 and 4: ITABLE OF CONTENTSList of Figures .
Page 5 and 6: IIIList of Figures 1Figure 1: Equit
Page 7 and 8: VTable 33: Criteria for Auction Ext
Page 9 and 10: 11 Introduction1.1 Motivation and O
Page 11 and 12: 3Figure 2: World Equity Market Capi
Page 13 and 14: 51.2 Course of ExplorationThis thes
Page 15 and 16: 72.2 The selected Stock ExchangesHa
Page 17 and 18: 92.2.2 The National Stock Exchange
Page 19 and 20: 112.2.3 The São Paulo Stock Exchan
Page 21 and 22: 13Table 3: São Paulo Stock Exchang
Page 23 and 24: 15Table 4: Shanghai Stock Exchange
Page 25 and 26: 17Table 5: Istanbul Stock Exchange
Page 27 and 28: 19Table 6: Warsaw Stock Exchange St
Page 29 and 30: 212.3 Organizational StructureTable
Page 31 and 32: 232.5 Exchange RatesFor the purpose
Page 33 and 34: 25compensation of this service, the
Page 35: 273.3.2 Brokered MarketsIn a broker
Page 38 and 39: 30price and quantity (Cohen and Sch
Page 40 and 41: 32However, the impact of electronic
Page 44 and 45: 36“Minimum Fill” (or “Minimum
Page 46 and 47: 38Figure 9: Order RoutingExchangeEx
Page 48 and 49: 40Figure 11: Order Book in an Order
Page 50 and 51: 42all exchanges. Generally, more th
Page 52 and 53: 44and decide if a parallel trading
Page 54 and 55: 46groups of similar liquidity (see
Page 56 and 57: 48Order TypesGenerally, there are t
Page 58 and 59: 50The Trading DayTable 18: Opening
Page 60 and 61: 52Matching and uncrossingAs already
Page 62 and 63: 54Figure 14: Volatility Bands at th
Page 65 and 66: 57Table 24: Market Types and Order
Page 67 and 68: 59The three stages of price variati
Page 69 and 70: 61according to price/time priority
Page 73 and 74: 65Additionally, there are special a
Page 75 and 76: 67Table 34: Discretionary Trading H
Page 77 and 78: 69Order Entry ParametersThe rules o
Page 79 and 80: 71Trading unitsPrices of B-shares o
Page 81 and 82: 73Market ParticipantsISE members au
Page 85 and 86: 774.6 The Warsaw Stock ExchangeIn t
Page 87 and 88: 79Must-be-filled orders can be plac
Page 89 and 90: 81Figure 19: Trading Phases of the
Page 91 and 92: 83executable at a determined price
Page 93 and 94:
854.7 The Dubai International Finan
Page 96 and 97:
88The Trading DayTable 52: Opening
Page 98 and 99:
905 ConclusionThe ever-increasing n
Page 100 and 101:
92Table 56: Synoptical Table of Mar
Page 102 and 103:
94Trades effected through the Elect
Page 104 and 105:
967 ReferencesLiteratureBARUCCI, E.
Page 106 and 107:
98GIRIDHAR, G., 2004. Market Micros
Page 108 and 109:
100PECHLANER, V. M., 2001. An Analy
Page 110:
102EIDESSTATTLICHE ERKLÄRUNGIch er
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