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In a price time priority matching algorithm, if we have a market buy order first in the queue, would it first try to match other market sell orders or match other limit sell orders in the orderbook?

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This can't happen during trade. For market and limit can exist only on one side with other side being empty. As market order are of highest priority they would be matched with market sell orders

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  • would it? I'd assume that "market" orders would match the best limit sell/bid (bid/ask) at the time of the order. – D Stanley Jan 10 '20 at 14:10
  • Or are you saying that if there are no limit sell orders then a market order will "wait" until another market sell order comes along? – D Stanley Jan 10 '20 at 14:13
  • @DStanley Agreed. Such situation can't arise. Modified the answer. Market orders have highest priority. Say on illiquid stock, no buy orders, one market sell and one limit sell order. No trade happens as there is nothing on buy side. If a market buy order comes in, it will match with market sell order. – Dheer Jan 10 '20 at 14:40
  • Market orders matching first with limit orders seems to make more sense (in my naive understanding), as slippage would occur. Also if market orders only ever transact with other market orders, then limit orders would seldom get touched, won't they? Plus if market orders only match with other market orders, assuming they take the last transaction price as their transaction price, how will the market price ever move, it will always be the same until they take a limit order price. – Kai Chan Jan 12 '20 at 0:24
  • @KaiChan Market orders are of highest priority and would match first, if there aren't any, it would match with limit orders. However in a actively traded stock, the market order always find limit orders to match with... – Dheer Jan 12 '20 at 8:58

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