When Prices Are Equal, Time Determines Execution
In previous lessons, execution order was always determined by price.
In this lesson, all eligible orders share the same price.
Price alone is no longer sufficient.
Stage 1. Multiple Asks at the Same Price
Event: Multiple sell orders arrive, all at $17 for a total of 13 apples.
All new asks have the same price.
They differ only by arrival time.
No trade occurs yet.
Stage 2. A Buy Order Arrives
Event: At 8:53 a buyer submits an order to buy 13 apples at $17
The buy price matches the ask price.
Execution can proceed.
Stage 3. Execution Proceeds by Time Priority
Because all eligible asks have the same price, arrival time determines execution order.
Execution proceeds in the order the ask orders were recorded.
Execution 1
4 apples are taken from the ask recorded at the earliest timestamp among the $17 sell orders:
- A - order is fully executed and removed.
- B - bid amount reduced from 13 to 9
- C - trade for 4 apples @ $17 written in trade tape at
Latest recorded price is $17
After execution 1, the earliest timestamp among the $17 sell orders is D
Execution 2
6 apples are taken from the ask recorded at
- E - order is fully executed and removed.
- F - bid amount reduced from 9 to 3
- G - trade for 6 apples @ $17 written in trade tape at
Latest recorded price is $17 Although the price value did not change, a new trade was written.
After execution 2, the earliest - and the only remaining - timestamp among the $17 sell orders is H
Execution 3
- I - 3 apples are taken from the ask recorded at This order is fully executed.
- J - the bid order @ $17 is fully executed.
- K - trade for 3 apples @ $17 written in trade tape at
The buyer’s order is now fully executed.
Execution Summary
After execution:
- the asks at $17 are fully removed
- the buy order for 13 apples @ $17 is fully removed
- the latest reported price is $17
Conclusion
When the incoming order’s price is equal to the prices of existing orders, the execution proceeds based on the existing orders’ arrival time, starting with the earliest time. Price determines eligibility; time determines sequence when prices are equal.
Although price may not change from one execution step to the next, a separate trade is recorded for each execution step.
When the trade tape shows several consecutive records at the same price, it indicates that the market was actively trading at that price.