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For a given stock, if:

  • a seller places a sell limit order at 100 dollars;
  • a buyer places a buy limit order at 200 dollars;

At what price will the transaction be executed and who will pay/get how much?

  • @DStanley can you elaborate a bit. What do you mean by "move"? Shouldn't the market maker detect automatically, that someone is willing to buy at a price higher than what the seller wants and fulfill the orders automatically? – Alexander Mar 15 '18 at 13:25
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At what price will the transaction be executed and who will pay/get how much?

There will be two transactions. The market maker will buy the stock from the seller for $100 and sell it to the buyer for $200.

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  • +1, interesting, i did not realize the market makers role and their potential for profit like this. – Dustin Mar 15 '18 at 14:11
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    Obviously in reality the profit per transaction is much, much smaller, but they make up for it in volume :) – D Stanley Mar 15 '18 at 14:13
  • Some brokers permit you to set a limit on orders that prevents one from buying "X" pct above or selling "X" pct below current price. It prevents one from from being screwed on a fill (buy at $200 when the stock is $100) since the order is flagged and rejected. – Bob Baerker Mar 15 '18 at 14:47
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    Wait - why wouldn't the orders just cross without market maker intervention, at the price of whoever has time priority? – dsolimano Mar 15 '18 at 19:27

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