An Order-Driven Market is a type of financial market in which buyers and sellers are able to display the prices at which they wish to buy or sell a particular security, as well as the amounts of that security desired. This form of trading environment differs significantly from quote-driven markets, where only bids and asks by designated market makers and specialists for specific securities being traded are displayed. Order-driven markets offer many advantages over their quote driven counterparts, such as increased transparency in pricing information due to all orders being publicly visible on an exchange’s electronic order book. Additionally, this kind of system allows for greater liquidity because it encourages more participants into the marketplace by providing them with up-to-date price quotes on available assets without having to rely solely on designated brokers or dealers who may not always be willing or able to provide competitive rates.The main disadvantage associated with an order driven system is that it can lead to wide bid/ask spreads when there isn't enough liquidity in certain asset classes; however this issue has been largely mitigated through improved technology allowing traders access real time data regarding current pricing trends across different exchanges so they can better assess whether buying/selling at certain prices will still be profitable after factoring spread costs into account. Additionally some exchanges have implemented rules requiring minimum levels of activity before trades can take place so investors don't end up paying excessive fees just because there aren’t enough other traders involved yet .Overall while there may be some drawbacks associated with using an order driven system compared its alternative - these issues have largely been addressed through technological advancements and regulations put forth by governing bodies ensuring fair trade practices amongst all parties participating within financial markets today . As such ,order driven systems remain one popular option amongst professional investors seeking efficient ways improve returns while minimizing losses incurred during transactions taking place within capital markets worldwide.
