Consider a European electronic crossing network that runs six crosses daily, that is, the orders are matched six times a day. This network allows a participant to specify several constraints, such as price and minimum fill. Suppose that all the orders submitted to this network for the shares of Christian Dior are good for day (GFD); that is, any unfulfilled part of an order is automatically resubmitted to subsequent crossing sessions during the day.
a. The following orders are on the network for the shares of Christian Dior at the time of the first crossing session of the day. The most recent trading price of Christian Dior at the Paris Bourse is €37.
• Participant A: a market order to buy 100,000 shares
• Participant B: a market order to sell 50,000 shares
• Participant C: a market order to sell 150,000 shares, with a minimum fill of 125,000 shares
• Participant D: an order to buy 20,000 shares at €36
Discuss what trades take place on the crossing network and what orders would would remain unfulfilled.
b. The following new orders are submitted to the next crossing session. The most recent trading price of Christian Dior at the Paris Bourse is €38.
• Participant E: a market order to buy 150,000 shares
• Participant F: A market order to sell 50,000 shares
Discuss what trades would take place on the crossing network in this crossing session and what orders would remain unfulfilled.