Order driven market- electronic crossing network

CFA Level III Portfolio Management
#1

The CFAI text book (vol 6 pg 15) says that the volume in a crossing system is determined by the smallest quantity submitted.

Can someone explain me this statement? I understand the features of electronic crossing networks given in the text book but this part beats me.

Thanks.

#2

In an ECN the system matches orders and there is no opportunity to cross the bid-ask . Since the system is matching automatically without intervention , only the smaller of the buy or sell orders determines the quantity traded . So if the buy order is 100,000 shares , while the sell order is only 50,000 it will execute 50,000 . A successful cross is determined by an exact match and the buyer cannot cross bid-ask to get more quantity , indeed there is no limit-order tree at all.

The prices are not set by the ECN itself , they are either based on an average price prevailing or taken directly from the quotes on the main exchange at that time.

#3

Thanks. This makes sense.

#4

Thank you

#5

Thanks for the clarification. My understanding is that electronic crossing networks is different from Electronic Communication Networks (ECNs). Which one are u refering to in ur answer. coz the question was about electronic crossing networks whereby "batching orders and matching them (crossing them) at various times during the day, _a_t prices derived from other markets in volume based on the smallest quantity submitted"