14 ms·

ELI5 market unlock?

notyourday 9y ago
Book is a set of "I buy X at Y" and "I sell K at P" standing orders ordered by the "best to worst" based on the price: Buy|Sell 1000@5|100@5.1 <-- top of the book/best price 1000@4.9|100@5.5 .. .. .. 100000@1|1000000@10000 <--- bottom of the book, worst price - this is "sucker catcher". If someone clown with more money than brains throws a marker order with the quantity higher than posted by everyone above, it will catch the bottom of the book. At this point no trades are happening because no one is offering to buy at a price that someone else is willing to sell. A market order is an order that does not specify the price. Only action and qualities. This is the only type of an "immediate" order because as long as there is anyone on the other side willing to sell or buy a quantity, it will be executed against the most eligible entry ( top ) of the book. What happens when you do a limit order? The limit order "Buy 5@4.95" will be inserted into the book based on the price so with this order the book will look: 1000@5|100@5.1 5@4.95|100@5.5 1000@4.9| .. .. .. 100000@1|1000000@10000 As you can see still nothing is trading because there's still a spread. What happens if someone does "sell 5000@5" against the book above: 1000@5|5000@5 <--- locked market 5@4.95|100@5.1 1000@4.9|100@5.5 .. .. .. 100000@1|1000000@10000 The market is now locked - there's someone who wants to buy @5 and someone who wants to sell @5. Result of this is automatic market unlock: 5@4.95|4000@5 <--- unlocked market 1000@4.9|100@5.1 .. .. .. 100000@1|1000000@10000 with a single 1000@5 traded so the "new price" of the asset is now @5 What happens when trading is suspended and market "ran away" i.e. significantly moved. Nothing special actually. All non-canceled orders are entered into a queue in an order of entry and are executed based on the book replay as if there was no suspension at all.

ELI5 market unlock?

Book is a set of "I buy X at Y" and "I sell K at P" standing orders ordered by the "best to worst" based on the price: Buy|Sell 1000@5|100@5.1 <-- top of the book/best price 1000@4.9|100@5.5 .. .. .. 100000@1|1000000@10000 <--- bottom of the book, worst price - this is "sucker catcher". If someone clown with more money than brains throws a marker order with the quantity higher than posted by everyone above, it will catch the bottom of the book. At this point no trades are happening because no one is offering to buy at a price that someone else is willing to sell. A market order is an order that does not specify the price. Only action and qualities. This is the only type of an "immediate" order because as long as there is anyone on the other side willing to sell or buy a quantity, it will be executed against the most eligible entry ( top ) of the book. What happens when you do a limit order? The limit order "Buy 5@4.95" will be inserted into the book based on the price so with this order the book will look: 1000@5|100@5.1 5@4.95|100@5.5 1000@4.9| .. .. .. 100000@1|1000000@10000 As you can see still nothing is trading because there's still a spread. What happens if someone does "sell 5000@5" against the book above: 1000@5|5000@5 <--- locked market 5@4.95|100@5.1 1000@4.9|100@5.5 .. .. .. 100000@1|1000000@10000 The market is now locked - there's someone who wants to buy @5 and someone who wants to sell @5. Result of this is automatic market unlock: 5@4.95|4000@5 <--- unlocked market 1000@4.9|100@5.1 .. .. .. 100000@1|1000000@10000 with a single 1000@5 traded so the "new price" of the asset is now @5 What happens when trading is suspended and market "ran away" i.e. significantly moved. Nothing special actually. All non-canceled orders are entered into a queue in an order of entry and are executed based on the book replay as if there was no suspension at all.