CFA Level I · CFA Level I Exam · Equity Issuance and Trading
A trading venue matches buy and sell orders using a rule-based, electronic order book, and no dealer commits its own capital to take the other side of trades. This venue is best described as a:
This is an order-driven market. Buy and sell orders are matched by set rules in an electronic order book, so no dealer has to commit capital. A quote-driven market instead depends on dealers who post bid and ask prices and trade against clients.
- Aquote-driven market
- Bbrokered market
- Corder-driven marketCorrect
Explanation
In an order-driven market, orders are matched by predetermined rules, typically price and time priority, in an order book. Dealers are not needed to supply liquidity. A quote-driven market relies on dealers who quote bid and ask prices and trade from their own inventory.
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