Basic Concepts IV: Comparison of Various Financial Markets

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The table presents the comparison of various financial markets and some of their basic features.

Equities Futures Forex
Market Structure Over the Counter (OTC) or Exchanged Traded, with Electronic Communication Network (ECN) routing available for both. Exchanged Traded through open outcry in trading pits; some contracts are traded by ECN after hours. Over the Counter (OTC) market with access to price determined by the market maker.
Spreads Spreads fluctuate according to demand and supply. Spreads fluctuate according to demand and supply. Spreads fluctuates on Inter-bank market, many online market makers have fix spread.
Execution Orders on listed stocks are placed with a specialist, who matches buyers and sellers, providing liquidity from his own account as well. OTC orders can be sent to market makers who take the opposite side of the trade at their quoted side. Orders are executed via open outcry at the exchange pit for each future contract. Orders entered electronically are routed to the pits to be executed. Orders on the Inter-bank market are sent directly to the counter party via Reuters or EBS. Orders executed with online market makers are executed at the market maker with the market maker as the counter party.
Order Types Market, Limit, Stop, Fill or Kill, All or None, Opening Price Guaranteed, Market on Close, Stop-limit, Market if Touched, Good Until Cancelled, Day Order Market, Limit, Stop, Fill or Kill, All or None, Market on Open, Market on Close, Stop-limit, Market if Touched, Good Until Cancelled, Day Order Market, Stop, Stop-limit, Limit
Trading Hours Typically 9:30am to 4:00pm local time. Off-hours trading can occur through ECN’s but it is illiquid. Vary by product, usually starts from 9:00am to 3:00pm local time. Off-hours trading is possible but illiquid. 24 hours during weekdays.
Volume Available Available Not Available
Market Size 100-200 billion USD daily volume in the US. 300-500 billion USD daily volume in the US. 1.5 trillition daily volume worldwide.
Transaction Cost Spread and commission/service charge. Spread and commission/service charge. Spread only.

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