Forex market: Influence on the market stability (part 1)
Modern trading systems possess set of the diversified market microstructures and the number of their variations continuously grows. First of all, techniques of the auctions differ. We will try to classify trading systems depending on a technique of the auctions. All exchange systems concern the first group, during the auctions on which the central place is occupied with the specialist, i.e. a member of the stock exchange obliged to support stability of the market and to act as the broker.
New York stock exchange is the brightest representative of such market structure. The second group is constituted by dealer systems where traders perform operations for the own account and compete among themselves. Dealer trading systems can be centralized, as, for example, the London stock exchange, and decentralized, for example, the market of international bonds which is constructed on the basis of bilateral communications between dealers and clients.
At last, the third group includes electronic trading systems. For today the trade most part in the global exchange market is conducted through such electronic systems, as Reuters and Electronic Broking System.
The trading system provides to all members of section equal possibilities of giving and execution of requests for purchasing and foreign exchange sale and also receptions of the information on a course of the auctions. Participants of the auctions can make transactions on its own behalf and on the instructions of clients, and also on its own behalf and at own expense.
Despite a variety of trading systems, the theory of a market microstructure doesn’t do between them cardinal distinction and carries out their aggregated analysis. Such microeconomic concepts as a spread, the warrant, a position etc., are identical to all financial markets without an exception. For this reason the micro structural approach concrete trading systems don’t interest, in the center of its attention there is a process and results of trade. The micro structural theory considers objects and subjects of trade, a condition of giving and execution of warrants and so forth, say, all that at micro level influences efficiency of functioning of the market and pricing on abstract financial assets. Thanks to the aggregated approach there is possible a carrying over of results of the analysis from one market on another without damage to the analysis.
We will use this prominent feature of the theory of a market microstructure also conduct isomorphic analogy between share and currency the markets. We will consider influence of such microstructures, as a flow of warrants, a spread and transparency of the auctions, on stability of the price of a financial asset. So just keep reading the second part of this article and find out interesting for you information,
People who took the decision to participate in forex trading must start from learning the basics of currency exchange market to make sure you do not have problems with this industry.
There is another option – you can hire experienced traders to do this job for you – read more about forex investment here. Also make sure to look for the info in a good forex book.
