Price-Time Priority Sets the Execution Price for Crossing Orders

Summary

This short exchange clarifies the execution price under a stated order-book rule: when a new bid crosses an existing offer, the trade occurs at the price of the older order. In the example, an offer to sell shares at $100 is already resting in the book when a bid arrives at $105. Because the offer was entered first, the execution price is $100 rather than the incoming bid price of $105.

The key concept is time priority: the incoming order accepts the resting order's terms, and the older order determines the transaction price in this particular matching convention. The answer is specific to the order-book definition given in the question; matching and pricing rules can differ across venues or simulated order books. The exchange offers a conceptual example but no broader discussion of queue priority, partial fills, or other matching rules.

Key ideas

• When a bid crosses a resting offer, the stated rule executes at the older order's price.
• In the example, the resting offer is older, so the trade executes at its $100 price.
• The incoming bid's willingness to pay more does not set the price under this convention.
• The explanation applies to the specified matching rule and should not be generalized to every venue.

Tags

# Order book question


# Order book question












This is a really simple question but I can’t figure it out. I was given this definition for trades in an order book. “A bid and an offer whose prices are the same or cross will pair, resulting in a trade. We consider bid and offer prices to cross when the bid price is higher than the offer price; in those cases, a trade will occur at the price of the older order”

I’m a little bit confused about the price point at which the trade occurs when there is a cross. For example, if the order book contained an offer of 100 dollars for 10 shares. If a bid comes in that is 105 dollars for 10 shares. Would the trade occur at 105 dollars or 100 dollars? I feel like it should be 105 dollars but I’m not sure what the older order means. Would the offer of $100 be considered the older order since it’s already in the book?

## Answer by Ishika Jain (score 0)

https://quant.stackexchange.com/a/80710

I assume you are referring to Jane Street Order Book guide? It would occur at 100. Older order means whichever of bid or sell comes first, that will be the price at which the trade is executed.

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