I think btilly is proposing a new sort of price - some kind of time-varying, smoothed average of the last trade and orders in the book - distinct from any of th

I think btilly is proposing a new sort of price - some kind of time-varying, smoothed average of the last trade and orders in the book - distinct from any of the current notions of price. The critical thing is (I think) the concept of price takes time to move, making it possible for use the liquidity that exists without HFT, but still letting HFT cover the gaps. For the example below, we suppose this new price can only move $0.01 a minute (obviously real thing would be more complex, but this makes things simple.) Then, the bid/ask is $10.00/$10.05 and the current price is $10.03. By placing a buy order at $10.20, the price will start trending upwards. So, if no-one comes along to trade in the next two minutes, the price will reach $10.05 and the order will fulfill since there are sellers at $10.05. This will clear the buys and the "pressure" on the price will return in to between the bid/ask spread. On the other hand, if a seller comes along after a minute and places an ask at $9.90, the trade will complete at $10.04, and both traders benefit. I'm not sure what the implications are but I'm not sure if you understood the time-varying, averaged price concept btilly was proposing. In the CAT example, I would expect the price to have trended to between the Bid/Ask spread from the last trade price (say it's $22.00) So that's where the order can execute if buyer and seller arrive at the same time. Again, I have no idea if this is good idea and the mechanics seem over complicated, but thought it was worth pointing out what might be a good idea.