The Difference Between a Quote-Driven Market & an Order-Driven Market

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Definition of Quote-Driven Market
“An electronic stock exchange system in which prices are determined from quotations made by marketmakers or dealers.”

Quote-Driven Market also known as a "Price-Driven Market".

A Quote-Driven Market is described as when registered market dealers are required to display bid prices and offer prices, and in this cases the maximum bargain size to which these prices are related. The benefit of a Quote-Driven Market is its liquidity, market makers or market dealers are required to meet orders from quotes. The drawback of this market is its lack of transparency.

Definition of Order-Driven Market
“A financial market where all buyers and sellers display the prices at which they wish to buy or sell a particular security, as well as the amounts of the security desired to be bought or sold. This is the opposite of a quote driven market, which is one that only displays bids and asks of designated market makers and specialists for a specific security.” An Order-Driven Market is described when investors submit the buy and sell orders to a central place where they are matched. The market price is derived from this constant process to match the demand with supply. The benefit of an Order-Driven Market is transparency, the orders books are displayed for the investors who wish to access the information. Mostly exchanges charge some fees for such information. On the other side, an Order-Driven Market has not the same degree of liquidity as the Quote- Driven Market. The disadvantage of Order-Driven Market is that there is no guarantee that all the orders will be executed.

The difference between a Quote-Driven Market & an Order-Driven Market Here the some difference between Order-Driven Market & Quote-Driven Market. 1The difference among these two marketing systems is based upon that what is display in the markets in term of bid and ask prices and orders. The Order-Driven Market show all of the ask and bid prices, whereas the...
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