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Transcript
The Fourth Market BA 543 Section 001 Kechen Yang April. 23/2013 Agenda Definition Electronic Communication Networks (ECNs) How the Fourth Market works? Why ? Fourth Market The direct trading of exchange-listed securities between investors (large institutions) • Due to electronic communications networks (ECNs) Electronic Communications Networks (ECNs) Private trading networks Bypass brokers and dealers Most effective for high-volume, actively traded stocks ECNs offer such advantages as lower costs, anonymity, open limit order books, and after-hours trading Levy a small surcharge No higher than a few cents/per share Electronic Communications Networks (ECNs) cont’d Instinet RediBook B-Trade (Bloomberg) Tradebook Archipelago (run by the Pacific Exchange) Trade Processing Participants(Institutions) ECNs Offer Post（in code） Execution If Accepted Exposed to other participants Steps Connect to ECNs Personally Through a brokerage Enter a bid Place orders (limit orders, listed anonymously) Match/accepted Execution Vs. Traditional Market Directly trade between two parties Avoid brokerage fees- without a broker intermediary Avoid exchange transaction fees Why fourth market Institutions trades Large volume Over 10,000 shares > $200,000 of a security Consequently substantial savings Avoid commissions Quicker at Reasonable price Anonymous Exercise T F 1. The general public is not allowed to engage in the fourth market. 2. Fourth market trades a. Occur on national exchanges. b. Occur on regional exchanges. c. Occur only through the Internet. d. Are direct trades between institutional investors. 3. The over-the-counter market is both a primary and _______ market. Q&A Reference “Introduction to Finance: Markets, Investments, and Financial Management” by Ronald W. Melicher, Edgar A. Norton “Investments: An Introduction” by Herbert B. Mayo Financial Instruments: Equities, Debt, Derivatives, and Alternative Investments by David M. Weiss Electronic Communications Networks (ECNS) - How Ecns Work Trading, Systems, System, and Market http://ecommerce.hostip.info/pages/376/ElectronicCommunications-Networks-ECNS-HOW-ECNSWORK.html#ixzz2R93z2lZA http://www.investopedia.com/articles/02/101102.asp http://wiki.mbalib.com/wiki/%E7%AC%AC%E5%9B%9B%E5%B8 %82%E5%9C%BA http://www.answers.com/topic/fourth-market#ixzz2R8lcbn8S Thank you!
