One-To-Many

What Is One-To-Many?

One-to-many is a type of trading platform or market where all purchasers and sellers transact with just a single market operator. Though a run of the mill exchange includes a specialist or primary market maker matching purchasers with sellers, a one-to-many platform operator will purchase all assets from sellers and resell them to purchasers. All offers and offers are centralized and posted by the platform or market operator.

Grasping One-To-Many

A one-to-many market includes one group or organization transacting with different purchasers and sellers. In any case, rather than the standard "many-to-many" platform, one-to-many is rarely utilized in capital markets. The Commodity Exchange Act, for example, doesn't remember one-to-many markets as official trading facilities.

Many-to-many platforms are a given for most traded assets, like stocks, bonds, derivatives, commodities, as well as currencies. Huge numbers of the two sellers and purchasers of an asset meet up at an exchange, which will charge transaction fees for its service.

For certain markets, a one-to-many platform is more suitable. For instance, the auction market for art. A single show-stopper, similar to a one and just Picasso painting, would be put available to be purchased by Sotheby's or Christie's for many bidders.

Be that as it may, since an auction house is probably not going to purchase an asset from the proprietor first to remarket it, it will possibly sell the art in the event that the reserve price is met. The offers, as well as the auction house's offers, are completely piped through the auction house. This is certainly not a perfect model, yet it features that not all markets interface purchasers and sellers straightforwardly. With a one-to-many platform, there is an operator or business in the middle.

Illustration of a One-To-Many Market Place

The most scandalous illustration of a one-to-many trading platform was Enron Online (EOL), an unregulated online trading platform for gas and power laid out in the late 1990s. Market manipulation, false reporting, and wash trading brought Enron EOL to a rather fast destruction.

Enron acted as the counterparty to each transaction that took place on the exchange. This means that Enron's credit was being depended on for each transaction. In a normal market, a clearinghouse guarantees that the two sides of the trade get what they should. In an unregulated or over-the-counter (OTC) market, there is counterparty risk. This type of risk comes from not knowing whether the other party can deliver on their side of the trade.

Initially, Enron had a decent reputation and credit, however before long breaks started to form. Enron could never again hold up its finish of the trades. Traders transacting with Enron additionally escaped, leaving it without the revenue supply it expected to assist with supporting its faltering business in other areas.

While the EOL project and Enron failed, it was effective for Enron for a period. The platform dealt with more than $300 billion in trades in 2000.

Features

For certain markets, a one-to-many platform is, notwithstanding, more proper than a many-to-many one — as on account of a liquidation or markets for very illiquid assets.
One-to-many is a market structure where a sole market maker or operator trades against all purchasers and sellers in a security.
As opposed to the standard "many-to-many" market design, one-to-many is rarely utilized in contemporary capital markets.