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BA 543 – Mike Carrigg
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Timeline Similarities and Differences Trading Mechanisms Other Trading Methods
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NYSE 1792 – Founded 2000 – Rule 390 Eliminated 2005 – Hybrid Market Launch 2006 – Acquired Archipelago 2006 – NYSE made Public 2007 – Euronext Merger 2008 – Amex Acquistion NASDAQ 1971 – Founded 1978 – Amex Merger 1987 – Small Order Execution System (SOES) 2002 – SuperMontage 2005 – Acquired Instanet 2007 – Acquired PHLX
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NYSE/NASDAQ Ownership: Public, for-profit Market Type: Secondary markets Quote-driven Continuous market aspects Hybrid structure Technical: Price reporting, regulation, price variation
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NYSE Market Order-driven market Auction type Specialists system Physical Location Mechanisms SuperDOT Broker-dealer Commission broker Floor Brokers Registered Traders NASDAQ Market Dealer-quote driven market Market-makers No physical location Mechanisms SOES and SuperMontage NMM Small Cap Market
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Originally You/Firm > Broker > Floor Broker > Execution Specialist (agents & principals) auction system Open/close with call market, continuous normally Now You/Firm > Broker > Floor Broker/SuperDOT > Execution Specialists, broker-dealers, commission brokers, registered traders
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Role of the Specialist NYSE-listed stock assigned to a specialist Match bid/ask prices for execution Balance for liquidity by holding shares to maintain market equilibrium Establish a fair price for stocks at day start Can also execute stop orders
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Originally You > Broker > Market Maker > Execution Purely quote-driven, “fragmented” Now Market Maker, SOES, and SuperMontage PHLX – physical floor space NMM – Outstanding of $1.1 mil at $1/share Small Cap – those not meeting NMM
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Role of the Market Makers Assigned to stock by average daily volume Once order is received, sells from inventory or locates an offsetting order Ensure a buyer for every sell order and a seller for every buy order Enhance market liquidity and long-term market growth
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ECN (Electronic Communication Network) Off-exchange brokers connecting buyers and sellers Rule 390 ATS (Alternative trading System) Direct trading without the use of a broker ITS (Intermarket Trading System) Allows traders to move to other exchanges for best price Algorithmic Trading Splits large orders into smaller ones, NYSE trade size reduction from 2000 to 330
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Resources Investopedia Staff. "Electronic Trading Tutorial." Investopedia. 2010. Web. 15 Apr. 2011.. Investopedia Staff. "The NYSE and NASDAQ: How They Work." Investopedia. Web. 15 Apr. 2011. NASDAQ. Web. 16 Apr. 2011.. NYSE. Web. 16 Apr. 2011.. Image Sources NASDAQ.com, NYSE.com, dealbreaker.com, ceoworld.biz
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BA 543 – Mike Carrigg
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