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

One-to-many is a market structure where a sole market maker or operator trades against all buyers and sellers in a security.
In contrast to the standard “many-to-many” market design, one-to-many is rarely used in contemporary capital markets.
For certain markets, a one-to-many platform is, however, more appropriate than a many-to-many one–as in the case of a liquidation or markets for very illiquid assets.

A one-to-many market involves one group or organization transacting with multiple buyers and sellers. However, in contrast to the standard “many-to-many” platform, one-to-many is rarely used in capital markets. The Commodity Exchange Act, for instance, does not recognize one-to-many markets as official trading facilities.

Many-to-many platforms are a given for most traded assets, such as stocks, bonds, derivatives, commodities, and/or currencies. Multitudes of both sellers and buyers of an asset come together at an exchange, which will charge transaction fees for its service.

For certain markets, a one-to-many platform is more appropriate. For example, the auction market for art. A single work of art, like a one and only Picasso painting, would be put up for auction by Sotheby’s or Christie’s for many bidders.

However, since an auction house is unlikely to purchase an asset from the owner first in order to remarket it, it will only sell the art if the reserve price is met. The bids, as well as the auction house’s offers, are all funneled through the auction house. This is not a perfect example, but it highlights that not all markets connect buyers and sellers directly. With a one-to-many platform, there is an operator or business in the middle.

The most infamous example of a one-to-many trading platform was Enron Online (EOL), an unregulated online trading platform for gas and power established in the late 1990s. Market manipulation, false reporting, and wash trading brought Enron EOL to a rather quick demise.

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

Initially, Enron had a good reputation and credit, but soon cracks started to form. Enron could no longer hold up its end of the trades. Traders transacting with Enron also fled, leaving it without the revenue supply it needed to help support its failing business in other areas.

While the EOL project and Enron failed, it was successful for Enron for a time. The platform handled more than $300 billion in trades in 2000.


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