6.12.2005

Q&A: Give an example of a call market.

A:
  • During the early stages of development of an exchange when there are few stocks listed or a small number of active investors / traders.
  • At the opening for stocks on the NYSE if there is an overnight buildup of buy and sell orders, in which case the opening price can differ from the prior day's closing price.
  • If trading is suspended during the day because of some significant new information. The mechanism is considered to contribute to a more orderly market and less volatility in such instances because it attempts to avoid major up and down price swings.

Bonus Points

  • In a call markets, trading for individual stocks takes place at specified times. The intent is to gather all the bids and asks for the stock and attempt to arrive at a single price where the quantity demanded is as close as possible to the quantity supplied. In a continuous market, trading occurs any time the market is open to buyers and sellers.
  • In a continuous market, trades occur at any time the market is open. Stocks are priced either by auction or by dealers. In an auction market, there are sufficient willing buyers and sellers to keep the market continuous. In a dealer market, enough dealers are willing to buy or sell the stock.
  • Although many exchanges are considered continuous, they (i.e. NYSE) also employ a call-market mechanism on specific occasions.

Category: C++ Quant > Financial Markets

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