Orderly Market

An orderly market is any market in which the supply and demand are reasonably equal. The orderly market would thus be said to be in a state of equilibrium. This term can also refer to a site of exchange for goods, services or financial securities that is run in a fair, reliable, secure, accurate and efficient way. Orderly markets contribute to economic growth.

Orderly markets usually have stable and competitive prices, reflecting the true value of the good or service. For securities markets, a stock exchange's market surveillance team of specialists is the entity in charge of ensuring an orderly market. Specialists do this by jumping in with their own capital when there are not sufficient buyers or sellers. This helps reduce market volatility. In a disorderly market, there may be market manipulation, insider trading and other violations. The rules of the exchange prohibit specialists from trading ahead of investors who have placed orders to buy or sell a security at the same price. If a market is disorderly, investors may lack the confidence to participate. The Federal Reserve also attempts to promote orderly market functioning by ensuring market liquidity.

If a particular catalyst threatens an orderly market, a number of players can be responsible for confronting this threat and maintaining an orderly market. For example, on June 23, 2016, when Britain voted to leave the European Union, the chief operating officer of the New York Stock Exchange (NYSE) Stacey Cunningham pulled an all-nighter calming Wall Street money managers and traders. The 'Brexit' vote could have had deleterious effects on the U.S. equities market, but Cunningham assured agents and, by extension, stockholders, that NYSE's trading model would stabilize and protect the capital of NYSE-listed companies. By design, NYSE's Designated Market Makers (DMMs) closely monitor the markets and use their own capital to minimize upset and create price efficiency. This is especially useful in a volatile market. The following morning, DMMs would address global market uncertainty brought on by the EU political upset by adjusting market-open prices to better reflect the actual supply and demand for stocks.

The advent of Fintech has opened up new conversations regarding the maintenance of orderly markets. In 2017, Nasdaq hosted the EU Parliament, the European Commission, and European Securities and Markets Authority (ESMA) along with several representatives of national supervisory authorities, exchanges and market participants to discuss Fintech and its role in helping to facilitate and sustain fair and orderly markets. A takeaway from the discussion was the agreed-upon need for additional collaboration and openness between capital-markets constituents when it comes to Fintech usage.