About Centralized Market
Centralized market is a one-stop financial structure which is made up of having all orders redirected to a single exchange, with no competing market. The price quoted of the different securities traded on the exchange is the only price for investors who wish to purchase or sell the particular asset.
Understanding Centralized Market
There is no doubt that the New York Stock Exchange is regarded as a central market since orders are sent to the exchange and followed by an offset order. However the market for foreign exchange is not considered as centralized since there isn’t central location where currencies are exchanged and it is possible for traders to obtain competitive rates from different dealers all over the world.
In a more general sense the term “central market” refers to a special financial market that is arranged so that all transactions, whether they are purchase or sell orders are handled by an exchange centrally located that has no rival market for these specific financial instruments. The prices for security that are offered through and provided on the market (or market) are the only prices for investors looking to buy or sell specific securities listed by the exchange.
One major benefit of central markets is that prices are completely transparent and accessible to anyone to view. Potential investors can look over all quotes and trades and analyze how these trades progress when forming their strategies. Another important aspect of central markets is the presence of clearinghouses. clearinghouse that acts as a bridge between sellers and buyers and ensures the integrity of transactions since buyers and sellers effectively, interact through the exchange, not each other. This means that there is less risk of dealing with different counterparties is an important aspect of centralized markets. Other markets that are centralized across the globe include stock exchanges like TSE, TSE as well as commodity and security markets like CME and the ASE.
The Emergence of Decentralized Markets
Contrary to the central market system market, decentralized markets are expanding as they advance in the field of technology in computers that is making it possible for people to take part in online commerce , without the benefits of a central market. Instead of navigating to a website which serves as a central meeting location for sellers and buyers new styles of decentralized markets function by connecting sellers and buyers directly with one another to trade.
The decentralized model of market can be achieved through using a peer-to peer trading program on computers. The virtual currencies can also be used as a key element of the emerging decentralized market.