What is a key feature of order-driven markets?

Order-driven markets are characterized by the direct interaction of buyers and sellers through public orders, which are listed in the order book. In these markets, prices are determined by the supply and demand dynamics established by the public orders placed by traders. When a buy order matches a sell order, a trade is executed at the prevailing market price, reflecting the collective view of the market participants regarding the value of the asset being traded.

This transparency and reliance on public orders distinguish order-driven markets from dealer-driven markets, where prices may be set at the discretion of dealers. In contrast, in order-driven settings, as participants submit their buy and sell orders, the market equilibrates the prices based on these public transactions.

In summary, the key feature that defines order-driven markets is the mechanism by which public orders establish prices, reflecting the collective decisions of market participants without intermediary intervention in the pricing process.