© P.V. Viswanath, 2005
- Call Markets
- Dealer Markets
- Limits the free trading option: The free trading option is
limited for two reasons. First, since all orders will execute at the
auction price, aggressive
limit orders can be placed without fear of being picked off at those
insofar as the auction is transparent and order may be revised, traders
can adjust prices as
they see other traders place orders and as they see new information.
- Adverse information
effects may also be reduced in a call auction insofar as investors are
able to observe order
placement prior to the final price determination. For example, observing
a large order to
sell will cause potential buyers to adjust their buy orders.
- Collusion: NASDAQ dealers colluded to set bid-ask spreads.
- Ability to trade at any time
- Ability to cancel orders
- Tick Size
- Order types