Quote Driven Market
A quote driven market is a financial trading system where market makers or dealers provide continuous bid and ask prices for securities, facilitating liquidity by standing ready to buy or sell at quoted prices. It contrasts with order driven markets, as transactions occur directly between participants and market makers rather than through an order matching system. This model is common in over-the-counter (OTC) markets, bonds, and some stock exchanges for less liquid assets.
Developers should learn about quote driven markets when working on financial technology (fintech) applications, trading platforms, or algorithmic trading systems that involve OTC instruments or require understanding of market microstructure. It's crucial for building systems that interact with dealer networks, handle bond trading, or simulate market behavior in economic models, as it explains how liquidity is provided in less centralized environments.