Abstract
Markets match buyers and sellers, and enable the formation of security prices. The viability of a market therefore depends on how well buyers and sellers are matched and how accurately the trade price evolves. Matching implies the provision of liquidity. In classical finance theory, this conjures an image of the Walrasian auctioneer letting the hammer down on the final auction price. In real-world financial markets, the role of the auctioneer is fulfilled by the market maker or financial intermediary. But liquidity also arises from other aspects of the trading mechanism that are determined by the institutional framework and structure of a particular market, which in turn are determined by rules and regulations that govern trade and interaction between market participants.
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Notes
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© 2015 Andria van der Merwe
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van der Merwe, A. (2015). Market Structures and Institutional Arrangements of Trading. In: Market Liquidity Risk. Palgrave Macmillan, New York. https://doi.org/10.1057/9781137389237_3
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DOI: https://doi.org/10.1057/9781137389237_3
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