38. Structure of securities markets¹

The entry reviews essential elements of market structure — the systems, procedures, and protocols that determine how orders are handled, translated into trades, and transaction prices determined. There are various contrasting alternatives, such as order-driven and quote-driven markets; consolidated vs fragmented markets; human intervention vs electronic trading; and continuous markets vs periodic call auctions. A major objective of market design noted in the discussion is to enhance the accuracy with which prices are discovered in a dynamic, uncertain environment. Lastly, the entry points out that market structures are rapidly changing, and that much remains to be learned about how best to structure a technologically sophisticated, hybrid market that efficiently services the varied needs of diverse participants.