Nicholas Gates [said]: financial markets are auction markets
[LG:] Well, that is what they are supposed to be.
LOL. Not all of them are, nor were all of them "supposed to be."
Some are, and aren't. NASDAQ isn't an "auction market," it's a dealer market. Nor is it a stock exchange. ECNs are limit order books, are stock markets but are not stock exchanges. The NYSE operates via an open outcry auction, and is both a stock market and a stock exchange. The AZX operates via a Dutch auction, is a stock market, and is not a stock exchange.
[T]hey are really a merchandising scheme, where sentiment is highly manipulated.
Merchandising to me means the buying and selling of goods or commodities. If you are suggesting that the markets are a way of bringing together buyers and sellers, I agree. But you seem to suggest - and correct me if I read your message wrong - that there is something insidious afoot.
How do equity, fixed income, or options markets (whether or not they are exchanges, and however they operate) "manipulate" sentiment? Are you suggesting that there is a conspiracy at work?
That above and beyond the market participants (puttiing aside the popularly ludicrous proposal that they are all "corrupt enterprises" in every aspect of their businesses), the exchanges and market centers are corrupt and have malevolent, ulterior motives as well?
Or that the alternative to a market - which would seem to be an "infinitely" fragmented, often price discontinuous, inarguably information-bereft environment of dissociated buying and selling - would be an improvement?
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