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

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40Figure 11: Order Book in an Order-Driven MarketSource: www.iii.co.uk/, 27/02/2006Modern limit order books use computer technology for order entry and interfaces toreporting and clearing systems. They are categorized by how much information theyshow to the public: An open order book displays the prices and quantities of all the posted orders inthe book on a screen, thus, full market depth can be viewed. A partially closed order book displays the two or three highest buy and lowest sellorders. A closed order book does not show the quotes to all market participants. The orderbook is visible only to market makers or specialist.Generally, the order book is anonymous, meaning that the trading parties do not getto know their counterparties.The order book, whether it is open or closed, contains all buy and sell orders. Buy
41orders are pooled on the side for buy orders, and sell orders on the side for sell ordersrespectively. They are ranked under the terms of trade execution: the trading priorityrules, also common as price-time priority. The price priority rule ensures that buyerswho are willing to pay the highest price will be the first to buy and sellers who arewilling to sell at the lowest price will be the first to sell. The “secondary tradingpriority rule” (Schwartz 1988, p. 18) defines the sequence to be followed for ordersthat have be submitted at the same price. The most commonly used rule is the timepriority. The time priority rule assures that the order which is placed first has to beexecuted first. Alternative secondary trading priority rules are the size priority (thelargest orders are to be executed first) and the priority of orders placed by a certainlass of traders (pro rata execution) (Schwartz 1988).3.7 Trading Interruptions and Market ClosuresThe globalization of the world’s securities markets entails a substantially growingnumber of securities that are listed on more than one exchange (“multi-listedsecurities”). Therefore, the International Organization of Securities Commissions 32(IOSCO) has elaborated standards with and for its member exchanges to cooperatesuccessfully in the international marketplace and to maintain sound markets. 33 Onetool to provide “fair, efficient and transparent” (IOSCO 2002, p.1) markets is tradinginterruptions to address both potential and actual market disorder allowing time toevaluate the imbalance’s cause and to rebalance at a new trading price.The IOSCO carried out a survey (Report on Trading Halts and Market Closures2002) exploring the operation of trading interruptions, the issues raised in respect ofmulti-listed securities, and the implications for interactions among nationalregulators and markets.Trading interruptions, which include trading halts and market closures, are utilized in32 The International Organization of Securities Commissions is a forum of international cooperationfor securities regulatory agencies. It is the recognized international standard setter for securitiesmarkets comprising 169 members. The analyzed markets all are represented in the IOSCO, whether asordinary, associate, or affiliate members.33 If not otherwise stated, the information is taken out of the report of the Technical Committee of theInternational Organization of Securities Commissions “Trading Halts and Market Closures” (IOSCO2002).
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 42 and 43: 343.6 Orders and Order Books3.6.1 T
Page 44 and 45: 36“Minimum Fill” (or “Minimum
Page 46 and 47: 38Figure 9: Order RoutingExchangeEx
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 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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