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Gold/Mining/Energy : Canuc Increases High Grade Gold Production in Ecuador
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To: Winzer who wrote (79)3/30/1998 1:53:00 PM
From: BLZBub  Read Replies (1) of 493
 
This is my layman's understanding of the CDN (unlisted) exchange:

1) the market is controlled by dealers, and only their bid and ask price will appear on the quote system. If a dealer enters an ask on the quote system, it is mandatory that he also enter a bid, at a reasonable price and quantity. The dealer activities are monitored by the exchange to enforce this "reasonableness" policy.

2) shares are traded over the telephone. If you wish to buy, your broker will take your order and look on the quote system for dealers who have posted a bid and ask. Your broker will call those dealers to try to do a deal at your price. Therefore, you are somewhat depending on the trading skill of your broker (i.e. the brokerage's trading desk). I have seen trades not go through because the trader was too busy (or unavailable) to handle a small trade.

3) the dealers make their money on the spread between the bid and ask. There is always a dealer involved in every trade (i.e. you buy from a dealer, you sell to a dealer). Unlike the "listed" exchanges, retail investors never buy and sell with each other. If you try to buy or sell at some point between the current best bid and ask, you will only get filled if a dealer chooses to meet your price. This may happen because of a shift in the bid and ask structure due to supply and demand changes.

4) the spread between bid and ask will generally be higher (as a percentage of the share price)for low volume, less liquid stocks. This is simply due to the fact that the dealers can still make sufficient profits on smaller spreads if the volume is high. Because of this I usually wait for these high volume days to put in my orders.

Bill.
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