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A market has an existing limit buy order at $1.00. The market then receives a limit sell order at $0.95, what price is the transaction settled at?

7

While Victor's answer might be correct for the broker's he listed, you should know that the exchanges will usally define exactly (on a per-asset, sometimes per-instrument base) how marketable limit orders (that's what they're called) are treated.

I would claim that in most (all?) dealer markets the sell order would be filled at $1.00 (provided the quantities suffice), because it was marketable upon entry, see:

  • I could not say for certain what rules were in place at the time this answer was written, but as of Jan 2016, this behavior is required by the SEC for brokers and exchanges in the US. See Regulation NMS. – user32479 Jan 21 '16 at 20:32
  • I think that the NASDAQ rules have been updated. I found Rule 4757(a)(3) titled "Price Improvement", which seems to answer the question with the sell price being the bid price and not the ask price. – mattgately Oct 26 '18 at 15:18
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It depends on which order, order is already placed. If there is existing buy order with higher limit and then if sell order placed with less limit then filling cost would be limit cost of first placed order here in this case it would be $ 1.00

In other scenario, If there is existing sell order with lower limit and then if buy order placed with less limit then filling cost would be limit cost of first placed order here in this case it would be $ 0.95

  • In the question, the buy order at $1.00 existed and then the sell order arrived. – mgkrebbs Oct 8 '18 at 20:07
  • @mgkrebbs That's why As I mentioned in the first para, the price would be settled at $ 1.00 – Chintamani Manjare Oct 22 '18 at 11:23

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