A Trade Occurs at a New Price
At this point, the reported price is $10 from the most recent completed trade.
The book contains:
- an ask to sell 3 apples at $11
- a bid to buy 2 apples at $9
- no orders at $10
Event: At a buyer submits an order to buy 3 apples at $11 per apple.
The order is recorded in the bids ledger
What happens
The incoming buy order is priced at
$11
matching the existing sell order.
The quantities also match: both orders are for
3
apples.
Because the buy and sell prices overlap and sufficient quantities exist on both sides, a trade can occur.
Executing the Trade
Three apples are exchanged at $11 per apple.
As part of this execution:
- the matched buy A and sell B orders are removed from the book, and
- the trade is written C to the trade tape.
Reported Price
Writing the trade to the trade tape produces the new (latest) reported price.
The trade tape now contains two completed trades:
- an earlier trade D at $10 and
- a new trade C at $11
The latest reported price is now $11
Conclusion
A new price is reported only when a trade occurs and is written to the trade tape.
Placing an order alone — without a matching order on the other side — does not change the reported price.