Which price will be executed?

[privador81]

I wonder one thing.
Lets say before market open i put SHORT ORDER @10.00

And someone puts BUY ORDER @ 10.10

In which price takes place execution?



PS. In my experiencies My broker has always executed the price level around 10.10 if i SHORT and if i BUY then execution is around 10.00 level

 

[abattia]

Hi,

My first question would be “which market are you trading?”

If it’s electronic trading of US stocks or US futures, then these markets open their trading sessions with a “single price call market auction”; all trades at the open will take place at the same market-clearing price.

How is this market clearing price determined?

At the market open, bids and offers in the limit book are compared and all buyer/seller matches obeying the market’s order precedence rules (in most cases “price precedence”, then “time precedence”) are made. The lowest offer/highest bid resulting in a trade are then taken as the clearing price. All the matched orders then clear at this price, regardless of what limit price they might have specified.

In the unusual event the last feasible trade specifies different prices, the buy order will bid a higher price than the sell order offers. The market can clear at either of these two prices, or at any price between them; the clearing price is going to be determined by the rules of the specific market in this case.

 

[privador81]

I trade electronic IB broker

But how about auction prize?

Why when i put short order @10.10
at market open. I get executed prize @10.18
Why i am blessed that way? Why the executed prize isnt 10.10?

But when i put opposite way
ALWAYS execution taking place SAME limit prize i selected.

 

[abattia]

Quote from privador81:
Why when i put short order @10.10 at market open. I get executed prize @10.18 Why?

... Because you tend to short at a price that ends up being below the "clearing price".

Quote from privador81:
But when i put opposite way ALWAYS execution taking place SAME limit prize i selected.

... Because you tend to go long at a price that ends up being the "clearing price".

 

[el pollo]

Where did you get the term "clearing price" from?

I have never seen this terminology used in 20 years of trading.

Do you mean last sale?

 

[abattia]

Quote from el pollo:

Where did you get the term "clearing price" from?

I have never seen this terminology used in 20 years of trading.

Do you mean last sale?

Hi, el pollo

Different names are used in different markets...

see "Opening Auction Price" in http://www.nyse.com/pdfs/5653_NYSEArca_Auctions.pdf

see "GLOBEX OPENING" (#573) in http://www.cmegroup.com/rulebook/CBOT/I/5/5.pdf

 

[el pollo]

Ya' learn sumting new every day, thanks!

 

[privador81]

I read this material. Altough i have problems

For example
There is 1000 BUY order @19.00

I put SELL order1000 @18.00
opponent puts SELL order 1000@18.01

Who selles shares @19.00 Me or opponent?

Or only TIME when order where entered matters?

 

[el pollo]

Try using a little logic mate!

If there is a 19 Bid and you offer at 18 before a competing offer at 18.01, you make the first sale @ 19. Assuming you were there first, and offered lower....DUH!

I can't read these fucking threads any longer, sorry.

 

[abattia]

Quote from privador81:

There is 1000 BUY order @19.00

I put SELL order1000 @18.00
opponent puts SELL order 1000@18.01

Who selles shares @19.00 Me or opponent?

Hi, privador81

Assume that these three orders are the only three in the market at the open. Assume also that the market arranges orders by the pure price-time hierarchy.

An order book (with prices increasing down the page) with these orders would have those with the highest precedence appearing at the top on the sell side, and at the bottom on the buy side ...

Buy order
1. Only buyer – 1000 @ 19.00

Sell orders (ranked by decreasing precedence):
1. Your order – 1000 @ 18.00
2. Other seller – 1000 @ 18.01

The order matching procedure matches the highest-ranking buy and sell orders to each other. If the buyer will pay at least as much as the seller demands, the match will result in a trade. The process continues until the market arranges all possible trades.

In your example, the only trade will be between you and the only buyer (if the only buyer’s order had been for 1500 on the other hand, then 500 of the other seller’s 1000 would have been sold, too).

And all the trades would be arranged at the same price. What would this “clearing price” be? In the case you described, it could be either of 18.00 or 19.00 or any price between them; it will depend on the specific rules of the specific market.