How market and limit orders trade in an order book

A market order seeks execution against available prices without specifying a limit price. A limit order permits a purchase only at or below its limit, or a sale only at or above its limit. The limit constrains price; it does not guarantee a trade.

Displayed depth determines how much a quote can fill

An order book records buying and selling interest at different prices. The best offer is the lowest currently displayed selling price, not a promise that any quantity can be bought there.

Take an unchanged sell book with 100 shares at $25.00, 200 at $25.01, and 500 at $25.03. A buy order for 400 shares that consumes those offers purchases 100, then 200, then 100 shares at the respective prices.

The total is $10,005 before fees, for an average price of $25.0125. Only one quarter of the order traded at the initial best offer.

Now give the 400-share order a $25.01 limit. It can buy the first 300 shares for $7,502, but it cannot buy the remaining 100 at $25.03. Under an instruction that permits resting, the remainder waits for eligible selling interest. Other time-in-force instructions can cancel the unfilled quantity.

Queue position affects a resting order

In a price-time-priority book, a better-priced order has priority over a worse-priced order, and eligible orders at the same price are ranked by time. If older buy orders already stand at a price, an incoming seller can fill those orders before reaching a newer buyer.

A displayed trade at the limit price therefore does not prove that every resting order at that price should have filled. Queue position, quantity, and the venue’s treatment of displayed and undisplayed interest matter.

Price-time priority is a specified matching design, not a rule for every venue and instrument. Order types, reserve refreshes, and allocation methods require the relevant venue rules.

An accepted cancellation must precede execution

An order acknowledgment establishes acceptance for processing, not a completed trade. A cancellation request likewise does not establish that the order has already been removed.

If the matching engine executes the order before processing the cancellation, the execution stands under that sequence. The distinction matters when a trading system calculates exposure from a pending cancellation rather than the final order state.

Auctions use a different matching event

A closing auction gathers eligible interest for a single clearing-price event under the venue’s rules. An on-close order waits for that event rather than trading immediately through successive prices in the continuous book.

Continuous execution and auction participation therefore expose the participant to different timing and allocation conditions. Neither an order acknowledgment nor an indicative auction price guarantees the final quantity or price.