2. (38 points) Trader V, who used to be a scalper in the CBOT's soybean pit,...

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2. (38 points) Trader V, who used to be a scalper in the CBOT's soybean pit, now participates in an electronic soybean futures market. This electronic market has procedures that tell all traders the total of standing orders at any particular price and the individual trader his priority among that total, priority at a particular price being determined by the time the standing order was placed. A trader can have at most one standing order at any one price; that is, any adjustments in the quantity lose their time priority for the previous amount. With the most recent trade at 709.50, V sees his current computer screen as: Price 710.25 710.00 709.75 709.50 709.25 709.00 708.75 Quantity of standing orders with priority over Vs RHDOSSE 25 15 10 0 5 35 25 V's standing order nosogon 5 0 5 10 5 Quantity of standing orders V's standing order has priority over 25 nonoton 0 10 0 5 0 5 a) (8 points) An order arrives, from Y, to sell 35 lots at the best available price. What trades (at particular sizes and price) occur, from Y's perspective and from the perspective of those with standing orders, including V? b) (8 points) In response to that large market order, what (if any) new standing orders is V likely to place (as quickly as he can)? Specify the relevant price as well as the quantity. Explain your reasoning. 2. (38 points) Trader V, who used to be a scalper in the CBOT's soybean pit, now participates in an electronic soybean futures market. This electronic market has procedures that tell all traders the total of standing orders at any particular price and the individual trader his priority among that total, priority at a particular price being determined by the time the standing order was placed. A trader can have at most one standing order at any one price; that is, any adjustments in the quantity lose their time priority for the previous amount. With the most recent trade at 709.50, V sees his current computer screen as: Price 710.25 710.00 709.75 709.50 709.25 709.00 708.75 Quantity of standing orders with priority over Vs RHDOSSE 25 15 10 0 5 35 25 V's standing order nosogon 5 0 5 10 5 Quantity of standing orders V's standing order has priority over 25 nonoton 0 10 0 5 0 5 a) (8 points) An order arrives, from Y, to sell 35 lots at the best available price. What trades (at particular sizes and price) occur, from Y's perspective and from the perspective of those with standing orders, including V? b) (8 points) In response to that large market order, what (if any) new standing orders is V likely to place (as quickly as he can)? Specify the relevant price as well as the quantity. Explain your reasoning.

Answer rating: 100% (QA)

a From Ys perspective the trades that occur depend on the available standing orders and their priority Lets analyze the trades step by step 1 Ys sell ... View the full answer