A downstairs market (also known as a central market) is an on-exchange market (organized marketplace) where small orders are filled. This mechanism for matching sellers to buyers in large trades involves slicing a block trade into small chunks in order to avoid a substantial market impact. Through a downstairs market structure, investors can execute their orders in a gradual manner (in manageable pieces) without revealing the aggregate size of the trade. A downstairs market is a specialist/limit-order book structure as small orders get executed via a limit-order book with a specialist, rather than via a dealership market.
An upstairs market (also called a dealership market) is an off-exchange market which consists of a network of trading desks for the major brokerage firms and institutional investors. The network handles communications among brokers and investors by means of electronic display systems and telephones for the purpose of facilitating block trades and program trades. An upstairs market transaction involves the sale of shares of a listed stock through negotiations within the offices of a brokerage firm rather taking the trade to an exchange.
