Let's assume a very simplified situation. There is only one seller asking for 10$ and there is only one buyer bidding 20$. At what price would the transaction go?

Some answers say it won't, because the ask price has to match the bid price. (Does a market maker sell (buy) at a bid or ask price?) Other answers say, that the time ordering is important. (Bid-Ask at market open, which comes first?) Which answer is correct? What is the final price in the presented situation?


1 Answer 1


The earliest order is the price.

If the seller submits a Limit Order to Sell at $10 at 9:30 AM, it will enter the order book and $10 will be shown to the world as Best Ask.

Then if the buyer submits a Limit Order to Buy at $20 at 9:31 AM, it becomes a Marketable Limit Order because $20 is better than the Best Ask of $10.

The trade will be executed at $10, not somewhere between $10 and $20.

That limit order to buy at $20 will never be shown in the order book, nor will the $20 be shown as best bid.

A trade happens when:

  • Incoming Buy Order has limit price equal to or above National Best Offer; or
  • Incoming Sell Order has limit price equal to or below National Best Bid.

For examples of rules, please see http://nysearcarules.nyse.com/pcx/pcxe/pcxe-rules/chp_1_1/chp_1_1_8/chp_1_1_8_3/chp_1_1_8_3_11/default.asp


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