Orderdrivna

Orderdrivna is a Swedish term that translates to "order-driven" in English. It is most commonly used in the context of financial markets, particularly in stock exchanges and trading platforms. An order-driven market is one where the price of an asset is determined by the continuous interaction of buy and sell orders submitted by market participants. This contrasts with a quote-driven market, where market makers actively provide both buy and sell quotes.

In an order-driven system, buy and sell orders are placed in a central limit order book. Each order specifies a price and a quantity. Buy orders are ranked by price from highest to lowest, and sell orders are ranked by price from lowest to highest. When a new order arrives, the system attempts to match it with existing orders in the book. A buy order will be matched with the lowest-priced sell order, and a sell order will be matched with the highest-priced buy order, provided the prices are compatible. This matching process forms the basis for price discovery in an order-driven market.

Key features of order-driven markets include transparency, as all orders are visible to participants, and fairness, as all participants trade at the same prices. The liquidity in such markets is dependent on the depth and breadth of the order book. High trading volumes and a large number of active participants generally lead to greater liquidity and tighter bid-ask spreads. Many modern electronic exchanges operate using an order-driven model.