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Up0
I’m aware that the higher the number of member firms the better it is, however I thought the firm was referring to the number of companies in the equity market, but it doesn’t seem to be. Do you guys know what it is referring to?
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Up4
@vincentt, as per our curriculum we only have 2 things mentioned
Liquidity characteristics – Low bid ask spread, High depth, Resilient market (values near to intrinsic values/ prices adjust quickly)
Factors contributing to Liquidity – Many buyer and sellers, diversity of opinion, information and investment needs, Readily accessible electronic/physical location and market integrityIn the question, by firms I think mean which are based out of selling and buying in markets (given the context)
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Up3
@RaviVooda‌ hmmm… i thought they were referring to firms hence my answer was more firms would better reflect the market risk of a country. However that’s only true for an index not an equity market. Kinda puzzled.
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Up2
@RaviVooda‌ are they not referring to the amount of brokers (market makers)?
The answer:
Number of member firmsThe presence of many buyers and sellers contributes to increased market liquidity. Betania has a larger number of member firm than Alphastan. Since both markets are quote driven, Betania has more potential buyers and sellers. The additional buyers and sellers create more competition and greater diversity of opinion, leading to higher market quality.
The answer makes me feel that they are referring to something else (not companies) as they mention “since both markets are quote driven…”, wouldn’t orders driven have the same potential buyers and sellers?
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