Final Lesson — Orders, Executions, and Prices
At this point, every operation that can affect the market has been introduced.
Nothing new needs to be added.
What matters now is understanding
what actually changes the market state—and what does not
The Book Contains Possibilities, Not Outcomes
The asks and bids ledgers record open possibilities
They show:
- which orders are available to trade
- at what price
- in what quantity
- in what order of arrival
These records can change without anything trading.
Orders can be:
- added
- partially executed
- fully executed
- cancelled
All of these operations change the book.
None of them, by themselves, creates a new price.
The Trade Tape Records Outcomes Only
The trade tape records completed executions
Each entry records three things:
- when the trade occurred
- what price traded
- how much traded
Nothing else is recorded there.
The tape does not :
- show available orders
- show intent
- show orders that never traded
- change unless a trade is executed
What Updates the Reported Price
The reported price is updated only when:
- a trade is executed
- that execution is recorded in the trade tape
No other operation updates the reported price.
- Adding orders does not update the reported price
- Removing orders does not update the reported price
- Cancelling orders does not update the reported price
Until another trade is recorded, the reported price remains the value from the most recent execution.
On Large Participants and “Institutions”
Nothing in this tutorial changes when orders are submitted by large participants.
The book does not recognize institutions, funds, or traders.
It records only prices, quantities, and arrival order.
Execution outcomes depend on how orders are placed, not on the identity of the submitter.
Large participants tend to submit orders that are:
- larger in size,
- distributed across multiple prices,
- executed in parts over time,
- replenished repeatedly,
- or interleaved with other activities.
These behaviors increase the likelihood of:
- partial execution,
- multi-level execution,
- repeated trades at the same price,
- gaps caused by missing prices between eligible orders,
- and extended periods of activity without price change.
All of these outcomes have already been shown using the same mechanics.
No special rules apply.
No additional privileges exist.
The execution process does not change.
Everything that affects price in this tutorial is visible in the book.
Everything else is interpretation layered on top.
Price is a consequence of which orders are removed from the book — nothing more.
On Hidden and Non-Displayed Orders
Some markets allow orders to be non-displayed.
These orders participate in execution exactly like any other order.
They differ only in
visibility
not in
mechanics
A hidden order has a price, a quantity, and an arrival time.
It is subject to the same price and time priority rules as visible orders.
The only difference is that a hidden order is not visible in the book before it executes
When a hidden order is executed, the trade is recorded in the trade tape like any other execution.
As a result:
- the tape remains a complete record of what traded
- the book may appear to change “unexpectedly”
- but no execution rule has been violated
Hidden orders do not move the price in secret.
They become visible only through execution.
This tutorial focuses on execution mechanics.
Visibility rules vary by market and do not alter those mechanics.
On Ledger Size and Market Activity
Ledgers can be large, and in practice, they usually are.
However, size alone does not create a market.
If the asks ledger and the bids ledger do not
overlap at any price
no execution can occur.
No matter how many orders exist, the market is inactive.
A market becomes active only when at least one bid price meets or exceeds at least one ask price.
Until that condition is met, the book may be populated, but no trades are possible.
Execution requires price overlap not volume.
On Ledgers as Records of Open Orders
The asks and bids ledgers do not represent trades.
They represent open orders.
Each entry in the book is a conditional offer:
- an offer to sell at a specified price and quantity, or
- an offer to buy at a specified price and quantity.
Until an order is executed, it produces no market event.
An order may remain in the book, be modified, or be cancelled without affecting the reported price.
Only when opposing orders overlap in price does execution occur.
When execution occurs:
- orders are removed or reduced in the book
- a trade is recorded in the trade tape
- a price and quantity are attached to that execution
The trade tape records what executed.
The book records what was available to execute.
Price is formed only at the moment an execution is recorded.
This concludes the tutorial.
All market behavior shown here follows from the same execution rules.
Nothing else is required to explain the outcomes observed.