Market order traders pay the bid-ask spread (they demand immediacy). It follows that there is price uncertainty. Large market orders can have substantial and unpredictable price impacts. Limit orders instead are instructions to trade at the best price available, but only if it is no worse that the limit price specified by the trader. For example, you submit a limit order to buy 100 shares of BP at (at most) 515p per share. The order will be executed if there is a seller willing to give you his shares for 515p or less. In such a case, there is no price uncertainty but there is execution uncertainty. Note that standing limit orders are trading options that offer liquidity. In the USA, the securities firms and investment banking industry includes several types of firms: • National full-line firms acting both as broker-dealers and underwriters. The major US firms are Merrill Lynch and Morgan Stanley. • National full-line firms that specialise more in corporate finance and
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This note was uploaded on 09/23/2009 for the course BUSI 101 taught by Professor Wormer during the Spring '08 term at Acton School of Business.