Which of the following best describes a market where dealers provide liquidity by buying and selling stocks for themselves?[Fill in the blank]

Question

BlackTom AI · Accepted Answer

Quote-driven markets are characterized by dealers (market makers) who commit capital and continuously post bid and ask quotes, so they buy and sell stocks for their own accounts to provide liquidity.

1. Relevant knowledge points and concepts
- Dealer/market-maker model: dealers maintain inventories, post two-sided quotes (bid/ask), and trade on their own account. They earn the bid-ask spread as compensation for providing immediacy and bearing inventory and adverse-selection risk.
- Order-driven model: trading is done by matching buy and sell orders from participants; liquidity comes from limit orders in an order book rather than dealers’ inventories.
- Call-auction / batch markets: orders are accumulated and matched at discrete times to determine a single clearing price (not continuous dealer quoting).

2. Step-by-step reasoning
- The question asks for the market type where dealers provide liquidity by buying/selling for themselves.
- That description fits the dealer/market-maker role: posting quotes and trading from proprietary inventories.
- Therefore the market type is quote-driven.

3. Calculations / intermediate steps
- No numerical calculations are required; the reasoning is conceptual.

4. Why the correct answer is correct
- In quote-driven markets, dealers display quotes and stand ready to trade at those prices. They therefore provide immediate liquidity by transacting from their own balance sheets — exactly the behavior described in the question.

5. Why the other options are incorrect
- b. Call auction markets: liquidity is provided by pooling orders and matching them at discrete auction times, not by dealers trading for themselves.
- c. Batch markets: similar to call auctions — orders are batched and matched; liquidity is order-based rather than dealer-provided.
- d. Order-driven markets: liquidity comes from participants’ limit orders in an order book; there is no requirement that dealers trade from their own accounts.

6. Conclusion
- The correct choice is a. Quote driven markets, which matches the provided answer.

Which of the following best describes a market where dealers provide liquidity by buying and selling stocks for themselves?[Fill in the blank]单项选择题

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Which of the following best describes a market where dealers provide liquidity by buying and selling stocks for themselves?[Fill in the blank]单项选择题

类似问题

When two or more large firms form a cartel, the price of products would_______ and the output would_______________. This collusive behaviour more likely leads to a/an____________ in the level of efficiency.

A perfectly competitive firm is said to be more efficient than a monopoly firm because

A perfectly competitive firm is said to be more efficient than a monopoly firm because

According to the video, which market structure category is the car market best described as?

Which market structure has many firms, no market power, a homogenous/identical product and is very easy to enter?

Which market structure has -a small number of firms, each with high level of market power; -high barriers to entry, making it difficult for new firms to enter; and -mutual interdependence among firms?

The threat of competitors’ entering a market is very high in industries that perform a(n) _____ role and in industries where the primary product or service is _____.

Which of the following is not a characteristic of an oligopoly?

更多留学生实用工具

希望你的学习变得更简单

When two or more large firms form a cartel, the price of products would_ and the output would_. This collusive behaviour more likely leads to a/an____ in the level of efficiency.

The threat of competitors’ entering a market is very high in industries that perform a(n) _ role and in industries where the primary product or service is _.