| This dissertation finds that the probability of execution in electronic call markets is dependent on the matching algorithm used and the characteristics of underlying order flow. A high probability of execution can be achieved for electronic call markets using standard matching algorithms when the arrival rate of orders is high and users have a good idea of the range of prices for the security. A high probability of execution in an electronic call market is more difficult to achieve when the arrival rate of orders is low. In these cases, the choice of matching algorithm is very important. The addition of a market making function to the electronic call increases the probability of execution to reasonable levels. Also, using a variable time period for the batching of orders that is dependent on the number of orders entered into the system increases the probability of execution to reasonable levels.;Electronic call markets can provide the execution quality and the timely, reliable execution needed to satisfy investors. Most of the academic literature has focused on the better execution prices that investors can obtain from electronic call markets. Few, if any, have focused on the other important factor needed for a successful electronic call market - timely, reliable execution of orders. The dissertation focuses on the timely, reliable execution aspects of call markets under different order flow characteristics and different execution algorithms. A number of execution algorithms, those that are most likely to be used in practice, are evaluated. Closed form mathematical solutions are obtained in some simple cases and simulations are run for more complex environments.;The dissertation develops a more complicated model than the ones in current literature by considering the distributions of order size, order arrival, and order price congruently into one model. This results in providing valuable, realistic information to other academics, securities regulators, and investors on the best implementation of these systems in the current market environment. Additionally, the dissertation provides information on the current order flow characteristics of Nasdaq securities that are not contained in the literature to date. |
