The conventional response given to explain the difference between an auction and dealer markets is that auction markets are order driven and dealer markets are quote driven. However this paper argues that same set of equilibrium prices will obtain in each market. In dealer markets liquidity is supplied by entry of any trader to supply liquidity by permitting the submission of limit orders. In both cases investors face a competitive price schedule, which they can then trade against, and competition between traders in the auction market or between dealers in the dealer market should ensure that liquidity suppliers maker no excess profits.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Publisher Info
Paper provided by Financial Markets Group in its series FMG Special Papers with number
sp92.
Did you know? Each page is provided with a technical contact, in case something is not right with the supplied information. See under "publisher info".