Since the development of the using electronics trade  most  continuous  auction  markets, price-contingent limit  orders  are  arranged  on  the  basis  of  priority  rules  in  the  limit  rank book  and  help  provide  liquidity. There are two reasons from which the briefings are risky.  First liquidity  providers  threat  trading  with  better  informed  traders,  that  is being  picked  off. To  lower  this  threat,  liquidity  providers  would  like  the  selling system  to  allow  them  to  trade selectively  with  counterparties  of their  option Second,  they  risk  being  front-run  by  other  traders  and,  thereby  increase  the market  impact  of their  orders. In this way to smaller the risk  large traders desire to conceal their  orders  and  expose  them  only  to  traders  who  are  most likely to  trade. The  outcome  thus  far  recommend  that  the  execution  costs  are  smaller for  all trade-size  categories.  The divergence  in  average  trading  cost  remains  statistically important  after  calculating  for differences  in  adverse  selection,  relative  tick  sizes,  and economic attributes  across  samples. Researchers dispute that by using electronics procedure selling has tremendously increased. Due to selling method a trade-off between higher charges of operating a selling floor and likely better execution due to the beneficial job of the specialist and floor brokers. The liquidity job of the authority and floor brokers is more readily apparent for less energetic stores, the job of these branches is less clear for stores with large trading volume. The off-exchange traders may have a favorite to road briefings in liquefied stores electronically rather than earn the higher assignments of the floor broker and if the worth of human intermediation is worse for highly liquefied stores, then we may look frontwards to an automated trading mechanism to have worse execution charges for a test of liquefied store So by comparing execution charges of large and liquefied stores through the two market structures. Up to some extent it is intentionally biasing my outcomes in the direction of finding smaller execution charges in an automated trading system. The bigger dealing capacity in the dwelling homeland presents important liquidity benefits that may be unrelated to the relation efficiencies of the dealing mechanism. By analyzing execution assesses of supplies with alike characteristics in the two markets this paper attempts to overwhelm such a limitation and enquire the relation effectiveness of the market organizations in their usual dealing environment. While in an developed association dealing means offers many benefits over the floor but as by contemplating the present tendency toward automation of auction markets, the relation effectiveness of an automated versus a floor-based means is an important topic to be addressed.

1.2 Problem Statement

The matter engaged in the conceive of dealing schemes are complex (Harris (1996, 1997)). In most relentless auction markets, price-contingent restrict instructions are organized on the cornerstone of main concern directions in the restrict alignment publication and assist supply liquidity. A trade that happens when a hard-hitting dealer submits a market alignment and claims liquidity. To appeal demanders of liquidity, designers of dealing schemes desire liquidity providers to completely brandish their orders. However, brandishing restrict instructions can be dodgy for two reasons. First, liquidity providers risk dealing with better acquainted traders that is, being selected off. To smaller this risk, liquidity providers would like the dealing scheme to permit them to trade selectively with counterparties of their choice. Second, they risk being front-run by other traders and, thereby boost the market influence of their orders. To smaller this risk, large traders desire to conceal their instructions and reveal them only to traders who are most probable to trade with them. Harris (1997) says the art of trading lies in knowing when and how to expose trading interests. Traders who not ever reveal not ever trade. Traders who over-expose develop high transactions cost. If traders are compelled to brandish their instructions completely, the dealing scheme may not get the liquidity. Hence, designers of dealing schemes (including floor-based and automated systems) formulate dealing directions to assist liquidity provider’s better command the risk of alignment exposure. Rules of dealing are very significant because they constrain the proficiency of liquidity providers to command the risk of alignment exposure. A key significance is that liquidity providers may accept less compensation for their services in dealing schemes that supply better amenities to command risk.

1.3 Hypothesis

Floor trading is considered to be the best way of transaction of the returns but it is time consuming and traders are unaware of the liquidity. From an industrial organization perspective, the electronic trading mechanism offers many advantages over the floor (Domowitz & Steil (1999)). First, the advantage of any trading system increases with the number of locations from which the system can be accessed. Second, the heavy trading volume and the growing number of new listings raise concern about the capacity limits of a trading floor. Third, the development and maintenance cost of an automated market is considerably lower than that of a trading floor, thus providing significant cost reductions.

H1: There is a significant difference between floor trading and electronic system on liquidity.

The  possibility  that  human  intermediation  may  improve  liquidity  has  important  implications  for  stock  exchanges  and  electronic  communication  networks  that  are  considering  moving  to  the  present  form  of  electrical devices trading  system.  If  large  traders  are  not  able  to  trade  strategically  in  an  automated  market,  then  they  may  either  demand  larger  compensation  for their risk  or prefer  to trade  in  alternative  avenues.

CHAPTER 2: LITERATURE REVIEW

The trade  execution  costs  of similar  stocks  in  an automated  trading  structure and  a  floor-based  trading  structure. The cost of executing  trades  across  related  firms  is  considerably  lower  in New  York compared to  Paris’. The reliant variable for this study was liquidity, Stock cost volatility and independent variable was dealing volume. The   outcome  recommend  that  the  present  form  of  the  automated  trading system  may  not  be  capable  to  fully  replicate  the  benefits  of human  intermediation  on a trading  floor (Venkatarman, 2001).

The significance of “ATS” (Alterna