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Centralized Market

Reviewed by Sujaini | Updated on Jan 05, 2021


What is a Centralised Market?

A centralised market is a system of the financial market that is to have all orders directed to one central exchange with no other competitive market. Security prices available through and quoted by the exchange (or market) are the only prices available to investors who wish to purchase or sell the particular assets quoted on the exchange.

Breaking Down a Centralised Market

A centralised market refers to a specialised financial market, which is structured in such a way that all orders, whether purchasing or selling, are routed through a central exchange with no other competing market for those particular financial instruments.

One key aspect of centralised markets is that pricing is completely transparent and open to anyone to see. Another key component in regulated markets is the presence of a clearinghouse that sits between buyers and sellers and maintains the fairness of the transactions as both buyers and sellers are in turn transacting with the exchange and not with one another.

The Emergence of Decentralised Markets

In contrast to the centralised market model, decentralised markets are growing in line with the evolution of computer technology, which gives people the ability to participate in online commerce without a centralised market advantage. The introduction of virtual currency is also an important aspect of the new decentralised markets.

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