Introduction
The financial markets are part of everyone's life. People may not realize it but without a thriving capital market a country's economy would not exist. Open five days a week, fifty-two weeks a year, the daily ups and downs of the value of all markets causes consternation for the nation. The equity markets in particular are by far the most watched and dissected markets of all. They are covered by multiple financial television networks, hundreds of periodicals, not to mention thousands of internet sites. The equity markets' performance has become a daily ritual for society. There are of course many other markets that trade concurrently with the equity markets. Interest rates, currencies, commodities all have their own marketplaces listed and over-the-counter (OTC) that trade with large daily volumes.
So how does a marketplace work? This question may seem to be simple, but the answer is much more complex than the public realizes. In its simplest form a market matches up buyers and sellers at a certain price point. Once this occurs a transaction has taken place. These transactions take place on some type of execution venue. There are multiple types of venues where buyers and sellers are matched. In the equity markets, the markets have grown from a single entity, the New York Stock Exchange where all listed stocks are traded via a human based specialist model, to a vast network of electronic exchanges, ECNs (electronic communication networks), and dark pools. The transformation ...
