2017issue C0823

Screen execution starts from the live bid and ask

After open-outcry pits gave way to the screen, the executable bid and ask replaced a stale last trade as the basis for order choice. A market order pays the opposite side you can see, a limit order rests only where that book is executable, and the routing path still governs whether a change is delayed or filled twice.

Screen markets show a live bid and ask for futures and options. The last trade can be hours old or equal to the prior settlement, so it is not a reliable guide to what a market or limit order will receive.
A market order trades immediately at the available opposite-side price. A limit order trades only at a stated price or better and may rest unfilled if the displayed book is not executable there.
Floor routing printed electronic tickets, walked them to the pit, and keyed fills back from a desk. A quiet market could fill in a few minutes; volume and volatility stretched that to several minutes, and extreme cases ran 30 to 45 minutes.
Changing the price of a working floor order could produce two fills on the same instruction, and large-book traders often could not see their true position or balance during fast swings.

Entries in this reading3 entries

Current trackMarket order32 readings Limit order51 readings Order routing65 readings

The quote you can hit is not the last print

A major U.S. futures exchange closed most open-outcry pits at the end of the year before this 2017 discussion, shifting listed futures and options toward screen matching. Electronic matching is faster and cleaner than completing one order by telephone, paper ticket, and hand signals.

Screen markets show a live bid and ask for futures and options. Pit-era traders often had only the last quote or last trade.

The floor route from ticket to fill

In the early 2000s, orders typed into electronic platforms were still printed as floor tickets, walked to the pit, then keyed back from a desk rather than matched on-screen. That floor route could return a fill in a few minutes in a quiet market, several minutes when volume and volatility rose, and 30 to 45 minutes in extreme cases.

Changing the price of a working floor order could produce two fills on the same instruction. Large-book traders often could not see their true position or balance during fast swings.

What a market order and a limit order do on that book

An option last trade could be hours old or equal to the prior settlement, so the print was not a reliable guide to the price a market or limit order would receive. The current best bid and offer define what can be hit or lifted right now.

A market order is an instruction to trade immediately at the available opposite-side price rather than at a chosen standing price. A limit order trades only at a stated price or better and may rest unfilled if the displayed book is not executable there.

Why the routing path still matters

Order routing is the path an instruction takes from the trader to the matching venue, including phone-and-ticket floor handling versus electronic matching. A double fill is two executions on one intended instruction after a modify is sent before the first fill is known.

On the floor, a price change sent while the first fill was still unknown could produce that double fill. The screen shortened the path, but the instruction still only does what the venue actually receives.

What arrived with electronic access

Electronic access cut phone-entry friction, widened who could trade, and coincided with higher volume and deeper books. Brokers could manage leveraged-client risk more tightly and post lower day-trading margins.

Historical price series no longer had to be purchased as expensive exchange data products, and live data quality exceeded what open outcry supplied.

Educational research material, not investment advice. Historical source context does not establish present-day performance.

24 of 26 in the Market order track

201721-21 pp.Next on Market orderElectronic stop-loss orders and protected price bandsA stop-loss order is a resting instruction that becomes executable only after the market reaches a stated trigger price.

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By fieldOrder types and routing87 readings By year2017182 readings

All 32 readings tagged Market order

Also on Market order5 readings

1995Canceled prints versus executable fills 1999How order routing changes market and limit fills 2001Retail routing and market versus limit fills 2004Direct access order routing after the display rules 2004Listed-stock limit envelopes versus market-order routing