What are the main types of market organizations I need to know for CFA?

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AcadiFi · Accepted Answer

Market organization classifies trading venues along several intersecting axes: (1) by function — primary (new issuance) vs secondary (trading existing securities); (2) by timing — call markets (trades at specific times) vs continuous markets (trades anytime during session); (3) by price discovery — quote-driven (dealers post bid/ask) vs order-driven (orders match by price-time priority); (4) by execution mechanism — auction (buyers bid competitively) vs dealer (single counterparty); (5) by visibility — lit (public order book) vs dark (hidden). A single venue can combine several. Example: NYSE is a secondary, continuous, order-driven auction market with a Designated Market Maker adding quote-driven liquidity. The Tokyo Stock Exchange opens and closes with a call auction (Itayose) and runs continuous order-driven trading (Zaraba) in between. A FX interdealer platform like EBS is quote-driven by wholesale dealers. An IPO on NASDAQ is primary; all subsequent trades are secondary. Understanding these classifications helps analysts assess execution quality, informational efficiency, and liquidity for a given instrument. It also frames later topics: market indices, short-selling mechanics, and electronic trading strategies.

What are the main types of market organizations I need to know for CFA?

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