An organized market is an exchange where sellers and buyers meet to trade financial instruments such as stocks, bonds, commodities, currencies, and other securities. It provides infrastructure and rules for efficient trading, creating a centralized environment where trading transactions take place.
Key characteristics of an exchange include:
Centralization: The exchange provides a centralized meeting place for sellers and buyers to transact.
Transparency: The exchange ensures a high level of transparency by providing information on current prices, trade volumes, and other details available to the public.
Standardization: Exchange trading often involves standardized contracts, facilitating the trading and accounting processes.
Central Counterparty (CCP): Exchanges often use CCP systems to guarantee the execution of transactions and manage risks.
Auction Method: Exchanges may use an auction method, where prices are determined based on the bids and asks of participants.
Regulation: Exchange activities are subject to strict regulation by financial authorities and regulators to ensure market fairness and stability.
