What defines an order-driven market?

An order-driven market is defined by the direct interaction between buyers and sellers, allowing them to trade without the need for intermediaries, such as brokers or dealers. In this type of market, transactions occur based on supply and demand, and prices are primarily established by the orders placed by the market participants. This structure enables greater transparency and can lead to more efficient price discovery, as all orders are generally visible to other market participants.

The emphasis on direct trading aligns with the intrinsic characteristics of an order-driven market, which relies on the ability of sellers to meet buyer demand directly. This stand-alone mechanism helps in reflecting true market dynamics and participant intentions, distinguishing itself from other market structures like dealer markets where intermediaries play a central role in price setting and liquidity provision.