Financial Markets and Institutions (2-downloads)

Example of Using the Limit-Order Book

Suppose a trader on the New York Stock Exchange

was a specialist responsible for Circuit City stock.

The limit-order book might look like the following:

Now suppose the specialist receives a new 

200-share market order to buy, an order to be filled

at the best market price currently available. The spe-

cialist will consult the Sell Orders column and fill the

order at 37.37.

Next, the specialist receives a 300-share limit

order to sell at 37.12. Again, the specialist will con-

sult the book, but this time will look under the Buy

Orders column. The limit order will be filled with

100 shares at 37.25 and 200 shares at 37.12.

Next, suppose that a limit order to buy

500 shares at 36.88 is received. Since there is no

sell order for this amount, the order is added to the

book, which looks as follows at this point: