MIS 4500 Lecture Notes - Open Outcry, Price Discovery, Lowkey

• School: University of Manitoba
• Department: Management Info. Systems
• Course: MIS 4500
• Professor: Pourang Irani

Document Summary

Order types: market order: instruction to execute order promptly in public markets at best price available. Emphasizes immediacy of execution; bears some degree of price uncertainty limit order: trade at best price available but only if price is at least as good as specified limit price. Types of markets: (markets provide liquidity, transparency and assurity of completion) Straight through processing: automatic settlement of trade after execution. Open outcry auction market: old style: quote-driven (dealer) market: dealers establish firm prices at which securities can be bought and sold (closed-book markets: if limit order book is not visible in real time to public) Bond markets are overwhelmingly dealer markets (b/c of lack of liquidity) Effective spread: 2 x deviation of actual execution price from midpoint of market quote at time order is entered (may result in effective spread lower than quoted spread: order-driven markets: transaction prices established by public limit orders.