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Basic Concepts IV: Comparison of Various Financial Markets |
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Written by Administrator
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Saturday, 06 September 2008 |
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You have to understand the main difference between equity, futures, forex before you get started trading forex
The table presents the comparison of various financial markets and some of their basic features
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Equities |
Futures |
Forex |
| Market Structure |
Over the Counter (OTC) or Exchanged Traded, with Electronic Communication Network (ECN) routing available for both. |
Exchanged Traded through open outcry in trading pits; some contracts are traded by ECN after hours. |
Over the Counter (OTC) market with access to price determined by the market maker. |
| Spreads |
Spreads fluctuate according to demand and supply. |
Spreads fluctuate according to demand and supply. |
Spreads fluctuates on Inter-bank market, many online market makers have fix spread. |
| Execution |
Orders
on listed stocks are placed with a specialist, who matches buyers and
sellers, providing liquidity from his own account as well. OTC orders
can be sent to market makers who take the opposite side of the trade at
their quoted side. |
Orders are executed via open outcry at
the exchange pit for each future contract. Orders entered
electronically are routed to the pits to be executed. |
Orders
on the Inter-bank market are sent directly to the counter party via
Reuters or EBS. Orders executed with online market makers are executed
at the market maker with the market maker as the counter party. |
| Order Types |
Market,
Limit, Stop, Fill or Kill, All or None, Opening Price Guaranteed,
Market on Close, Stop-limit, Market if Touched, Good Until Cancelled,
Day Order |
Market, Limit, Stop, Fill or Kill, All or None,
Market on Open, Market on Close, Stop-limit, Market if Touched, Good
Until Cancelled, Day Order |
Market, Stop, Stop-limit, Limit |
| Trading Hours |
Typically 9:30am to 4:00pm local time. Off-hours trading can occur through ECN's but it is illiquid. |
Vary by product, usually starts from 9:00am to 3:00pm local time. Off-hours trading is possible but illiquid. |
24 hours during weekdays. |
| Volume |
Available |
Available |
Not Available |
| Market Size |
100-200 billion USD daily volume in the US. |
300-500 billion USD daily volume in the US. |
1.5 trillition daily volume worldwide. |
| Transaction Cost |
Spread and commission/service charge. |
Spread and commission/service charge. |
Spread only. |
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Last Updated ( Friday, 12 September 2008 )
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