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Price matching with Limit Orders

Personal Finance & Money Asked by oko125 on October 25, 2020

I have basic question concerning the stock market. I placed a Limit-Sell Order of 500 stocks at $1.45 for Stock X while it was trading below that. Two days later I woke up to all shares being sold for the actual price of $1.55 per stock. Of course I was happy about it, yet that must mean that the buyer ended up paying more per stock than for what I was willing to sell it for. I’m using a smaller platform so the bid-ask spread is oftern higher than at e.g. NYSE (I’m also not from the US). My understanding was that if given e.g.:

Ask 1000 $1.55
Ask  500 $1.45
Ask  200 $1.44

Bid  100 $1.43
etc.

and now a Market- or let’s say Limit Order for 1000 shares for $1.60 is placed that the buy order would’ve been executed like that:

200 → $1.44
500 → $1.45 <- my order
300 → $1.55
-----------
total: $1478

but instead my stocks were sold for the same, higher price. I suppose that is due to the fact, that the buyer was willing to pay $1.60 in this example? Is that what must’ve happened in this case or is there a different explanation?

Also: what happens if a stock is very low in volume (on that platform), let’s say someone wants to buy 1M stocks but only 900k are available? Is the order halted until the full volume is reached or would you first receive 900k stocks and the remaining 100k are still awaiting to be fulfilled? Is that part of the one-time transaction fee that is payed?

Thanks!

2 Answers

If you place a market order, it will be filled immediately. If buying and the size available at the ask price is greater than the size of your order, you'll be filled at current price. If the size of your order is greater, you will get a portion filled at current price and the remainder filled at the price of next higher sell order on the order book.

If you place a limit order, it goes on the order book and will sit there until market price reaches your price.

Answered by Bob Baerker on October 25, 2020

now a Market- or let's say Limit Order for 1000 shares for $1.60 is placed that the buy order would've been executed like that:

Yes what you describe is how it happens.

If your shares show a time of morning during the opening hours, the possible explanation is that the got matched with over night good till cancelled market orders.

Overnight market orders both buy and sell side are frozen for a short period, say 15 mins... new orders trade... this plus closing price plus index plus 6 months average goes into secret formula to determine the price. Market orders are then matched to market orders and spill over to limit orders. The price of these transactions is as per the formula.

Answered by Dheer on October 25, 2020

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