1.One of the major benefits to investors who execute trades through an order-driven system is:

A)   best price execution.

B)   human intervention during periods of high market volatility.

C)   market makers who stand ready to buy and sell at listed prices.

D)   liquidity at the lowest cost.

2.Which of the following American stock exchanges is a combination of order-driven and price-driven system?

A)   New York Stock Exchange (NYSE).

B)   NASDAQ National Market System.

C)   Chicago Board of Trade.

D)   NASDAQ Small Capitalization Market.

3.Which of the following is NOT a characteristic of an order-driven market?

A)   Centralized order book to match orders.

B)   Automated price quotations by market makers.

C)   Viewable standing orders.

D)   Liquidity is provided at the lowest cost.

1.One of the major benefits to investors who execute trades through an order-driven system is:

A)   best price execution.

B)   human intervention during periods of high market volatility.

C)   market makers who stand ready to buy and sell at listed prices.

D)   liquidity at the lowest cost.

The correct answer was D)

Order-driven systems offer advantages such as views of all standing orders that can be quickly executed via the central ordering system allowing traders to monitor liquidity. This provides for order executions at the lowest cost as compared to price-driven systems. All other benefits relate to price-driven systems.

2.Which of the following American stock exchanges is a combination of order-driven and price-driven system?

A)   New York Stock Exchange (NYSE).

B)   NASDAQ National Market System.

C)   Chicago Board of Trade.

D)   NASDAQ Small Capitalization Market.

The correct answer was A)

The NYSE is a combination of an order-driven and price-driven system. The NASDAQ National Market System and NASDAQ Small Capitalization Market are price-driven markets. The Chicago Board of Trade is an options exchange using a price-driven system that involves open outcries of prices from market participants.

3.Which of the following is NOT a characteristic of an order-driven market?

A)   Centralized order book to match orders.

B)   Automated price quotations by market makers.

C)   Viewable standing orders.

D)   Liquidity is provided at the lowest cost.

The correct answer was B)

Posting price quotations by market makers is a characteristic of a price-driven market. Order-driven markets do not have market makers. Instead, the auction market matches the supply and demand for securities directly.