Free Crowd System

Posted in Finance, Accounting and Economics Terms, Total Reads: 635

Definition: Free Crowd System

A free crowd system is a system of commodity trading in which all floor members, i.e traders or dealers/brokers, can make bids and/or offers at the same time for their own personal accounts or client accounts. This practice is common in the US financial markets. In this system of trading, the floor traders have the facility to enter orders as well as execute orders simultaneously. These transactions may happen simultaneously at different places in the trading ring.

The free crowd system of trading is common to most major US commodity exchanges. The free crowd system functions in conjunction with the board broker system and specialist brokers of a commodity exchange. Matching and executing and orders, providing quotations for price, and trading accounts orderliness for the designated commodity traded is a necessary pre-requisite for the free crowd system of commodity trading to occur. This ensures that a market is created for the commodities assigned and smooth and orderly trade operations occur.

Commodity trading refers to trading in the commodity market. The commodity market is distinct as it trades in the primary economic sector, and not in manufactured products. Primarily commodity markets trade in soft commodities (agricultural products, such as wheat, sugar, cocoa) and also trades in hard commodities (such as mined commodities as gold, oil, zinc, aluminium).

The advantage of the free crowd system is that it allows for the feasibility of transactions occurring at different locations at the same time, within the given traded ring. Immediate (spot) delivery or future delivery is both possible through the free crowd trading system. Lastly, one of the major advantages of the free crowd system of commodity trading is that more than a single trade at varied, different prices can be recorded at exactly the same time because of this system. This leads to better market efficiency.


Hence, this concludes the definition of Free Crowd System along with its overview.

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