Order driven market- electronic crossing network

[gtamfreak]

The CFAI text book (vol 6 pg 15) says that the volume in a crossing system is determined by the smallest quantity submitted.
Can someone explain me this statement? I understand the features of electronic crossing networks given in the text book but this part beats me.
Thanks.

 

[janakisri]

In an ECN the system matches orders and there is no opportunity to cross the bid-ask . Since the system is matching automatically without intervention , only the smaller of the buy or sell orders determines the quantity traded . So if the buy order is 100,000 shares , while the sell order is only 50,000 it will execute 50,000 . A successful cross is determined by an exact match and the buyer cannot cross bid-ask to get more quantity , indeed there is no limit-order tree at all.
The prices are not set by the ECN itself , they are either based on an average price prevailing or taken directly from the quotes on the main exchange at that time.

 

[gtamfreak]

Thanks. This makes sense.