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I placed a limit sell order with a price of $11 on a stock yesterday, when the stock was trading at $10. Today, the price jumped up to $12 right at the open. I was worried my order would be filled at $11, but to my surprise, it was filled at $12. Can somebody explain the mechanism as to how this occurred? Was it because the order was submitted yesterday that helped me? What if I had placed the same order but after trading had already opened today at $12?

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  • What is the name of this stock? Which stock exchange is it listed on?
    – Flux
    Jul 1 at 2:20
  • @Flux I'd prefer not to name the stock but it's on the NASDAQ.
    – Craig W
    Jul 1 at 3:15
  • It could be because of price-time priority. Refer to How do exchanges match limit orders?
    – Flux
    Jul 1 at 11:52
  • @Flux In the comments of the accepted answer there, it sounds like the limit order submitted second gets the better price, which doesn't seem like was the case for me. So I think your single-price auction answer is correct.
    – Craig W
    Jul 1 at 13:37
  • Can you get the time and sales of that stock at the exact the time of your fill and edit it into your question? Many brokers offer this data on their trading platforms. A likely scenario is that the best bid at the time of the trade with quantity sufficient to fill your order was $12. A gap up (or gap down) at the open is not unusual.
    – Lou
    Jul 1 at 17:12
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On many stock exchanges, a single-price auction (call auction) occurs at the open (and at the close). Every order executed at the open gets executed at the same price. On the NYSE, this auction is called an opening auction. On the NASDAQ, this auction is called the opening cross.

If your order was filled at the open, it would be filled at the opening price.

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  • The trade happened at 9:30:03, I assume that's close enough to be considered "at the open"? My sale did happen at the opening price, so I suspect this answer is correct.
    – Craig W
    Jul 1 at 3:17
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I've found it surprisingly hard to find information on exactly how the execution price of an order is determined. This is my understanding, based on my own experience and research, of what happens when you place a limit sell order for $x:

  • If, at the time the order is processed, the highest limit buy order in the order book is $y, and y >= x, your order will execute at $y. In other words, since the person who placed the buy order did so before you placed your sell order, they "lose" (because they made their negotiation position public) and buy at their limit price while you get to sell at a higher price than your own limit.
  • Otherwise (at the time the order is processed, there is no limit buy order in the order book with a price greater than or equal to your sell limit), your order ends up in the order book. The orders in the order book are ordered(!) first by price and then by submission time. At the time a buy order comes in, the first sell order in the order book (the one with the lowest price, and if several orders have the same lowest price, the first one among them that was submitted) gets priority:
    • If the incoming order is a market order, it executes at $x.
    • If the incoming order is a limit buy order for $y, and y >= x, your order will execute at $x. In other words, since you placed your sell order before the other person placed their buy order, you "lose" (because you made their negotiation position public) and buy at your limit price while they get to sell at a higher price than their own limit. Note that in this scenario, you are "the other person" in the first scenario.
  • If your order goes unfulfilled in the course of the trading day (and was not set to expire at the end of the day), you will participate in the stock exchange's "opening auction" the following trading day. It is my understanding that they try to find an opening price that maximizes the volume of orders that can execute at the opening price. So if the opening price they determine happens to be higher than your sell limit price, your order will be executed at the opening price, even if it is higher than your limit.
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  • Good information. Since my sell order must have been submitted before any potentially matching buy orders, yet I got a higher price than my limit, I assume the "opening auction" is what happened, as per @Flux's answer.
    – Craig W
    Jul 2 at 15:56
  • @CraigW: Yes, as I understand, once a limit order ends up on the books, the opening and closing auctions are the only situations in which it might get filled at a better price than the limit. Jul 2 at 21:26
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A limit order can only be filled at the specified limit price or better.

A price gap occurs when a stock’s price makes a sharp move up or down with no trading occurring in between.

Your limit order to sell was executed at the market's open somewhere in the vicinity of the higher opening price.

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  • The question is why did it execute at that price? Presumably there were many limit buy orders around $12; did I get that price instead of my sell limit at $11 because my order was submitted earlier?
    – Craig W
    Jun 30 at 21:43
  • A gap is when the price of a security opens well above or below the previous day’s close with no trading activity in between. If there's no trading in between, you can't be filled there. The advantage of placing your order early is that you are closer to the front of the line. Jun 30 at 22:34
  • Surely it could have been filled there (i.e. at $11), under some circumstances? For example if I had placed my limit sell order at $11 after somebody had already placed a limit buy order at $12?
    – Craig W
    Jun 30 at 22:45
  • You placed an order to sell at $11. It sold at $12. Doesn't that reflect what I have explained? Jun 30 at 22:50
  • I want to know why it sold at $12 instead of $11, which would have also fulfilled the conditions of my limit order.
    – Craig W
    Jun 30 at 22:55

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