Securities Markets - Exchange Market Structure

Call vs. Continuous Markets
There are two typical structures of a securities exchange. They are:
  • Call Markets
    A call market is a market where a stock can only trade at a specific time. Bids for the stock are collected and then traded at a specific time and at one price. Because this market trades only at specific times and at one negotiated price, it is typically only used for smaller markets.
  • Continuous Markets
    A continuous market can occur at any time as long as the market is open. Buyers and sellers are matched up on a continuous basis and the price is determined through an auction or through bid-ask quotes.

Structural Differences Among the Different Markets
While markets and exchanges facilitate the buying and selling of securities, there are some structural differences among them.

  • National Stock Exchanges
    These exchanges trade numerous issues of diverse shares to a wide number of investors. A national stock exchange operates as an auction market where buyers and sellers are driven by price. The New York Stock Exchange (NYSE) and the American Stock Exchange (AMEX) are examples of national stock exchanges in the U.S. The London Stock Exchange (LSE) is an example of a national stock exchange outside of the U.S. A national stock exchange typically has stringent qualifications a stock must meet in order to be listed.
  • Regional Exchanges
    A regional exchange is similar to the national stock exchanges except regional exchanges serve smaller markets and typically trade smaller issues. A company that cannot list its shares on a national stock exchange because it does not meet the requirements may choose to list its share on a regional exchange. The Boston exchange is an example of a regional exchange in the U.S.
  • Over-the-Counter Markets (OTC)
    An OTC market is a less formal exchange. Both listed stocks and unlisted stocks can trade in the OTC market. The OTC market operates as an order-driven market where buyers and sellers submit bids and a dealer buys or sells the stock from his own inventory. Unlike a national exchange where a broker matches buyers and sellers, an OTC market comprises any securities for which there is a market. As a result, the OTC market is also referred to as a negotiated market. In the U.S., the Nasdaq system is used as the quotation system for the OTC market.

It is important to understand the relationship between exchanges and companies and the ways in which the requirements of different exchanges provide protection to investors. For more on the exchanges, review the article: Getting to Know Stock Exchanges

Exchange Market Characteristics


Related Articles
  1. Investing

    Trading Over the Counter

    OTC trades tend to be for smaller company stocks and debt securities. Debt securities such as bonds are generally traded by investment banks making markets for specific issues.
  2. Investing Basics

    What's an Exchange?

    An exchange is an organized marketplace where securities and other financial instruments are traded.
  3. Trading Systems & Software

    What's an Over-The-Counter Market?

    The over-the-counter market is a decentralized market in which unlisted securities trade.
  4. Investing Basics

    Why You Should Understand The Stock Market

    Even if you don't invest a cent in stocks, you should still understand how the stock market works. Find out why.
  5. Investing Basics

    A Look At Primary And Secondary Markets

    Knowing how the primary and secondary markets work is key to understanding how stocks trade.
  6. Investing Basics

    What is the Stock Market?

    A stock market is where shares in corporations are issued and traded. Stock markets are key components of a free market economy.
  7. Economics

    Macroeconomics: Currency

    By Stephen Simpson For citizens of different countries to conduct trade, they have to buy and sell each other's currencies. The price of a nation's currency, expressed as an amount of a second ...
  8. Personal Finance

    The Birth Of Stock Exchanges

    Learn how British coffeehouses helped give rise to the juggernaut that is the NYSE.
  9. Investing Basics

    Explaining Foreign Exchange Risk

    Foreign exchange risk is the chance that an investment’s value will decrease due to changes in currency exchange rates.
  10. Trading Strategies

    Forex Market Basics

    The foreign exchange market is a market where participants buy, sell, and exchange trillions of dollars worth of currencies daily. Learn the basics of the FX market.
RELATED TERMS
  1. Regional Stock Exchange

    A place outside of a country's primary financial center where ...
  2. Exchange

    A marketplace in which securities, commodities, derivatives and ...
  3. Equity Market

    The market in which shares are issued and traded, either through ...
  4. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context ...
  5. Primary Listing

    The main stock exchange where a publicly traded company's stock ...
  6. Listed Security

    A financial instrument that is traded through an exchange, such ...
RELATED FAQS
  1. What does it mean when my broker says that shares are for auction?

    An auction market is one in which stock buyers enter competitive bids and stock sellers enter competitive offers at the same ... Read Answer >>
  2. How does a company move from an OTC market to a major exchange?

    The over-the-counter market is not an actual exchange like the NYSE or Nasdaq. Instead, it is a network of companies that ... Read Answer >>
  3. How do I buy an over-the-counter stock?

    The process of purchasing over-the-counter (OTC) stocks is different than purchasing stock from companies on the NYSE and ... Read Answer >>
  4. Does all common stock trade on exchanges?

    Find out about types of common stock that trade on stock exchanges and types that trade in varied over-the-counter (OTC) ... Read Answer >>
  5. Can stocks be traded on more than one exchange, such as, for example, on both the ...

    A stock can trade on any exchange on which it is listed. And to be listed it must meet all of the exchange's listing requirements ... Read Answer >>
  6. Why are OTC (over-the-counter) transactions controversial?

    Learn more about over-the-counter transactions, and why OTC traders are considered riskier than traders working with larger ... Read Answer >>
Hot Definitions
  1. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  2. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  3. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  4. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  5. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  6. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
Trading Center