How Execution Works

cscott · Jul 9, 2006

Quote from loufah:

The bid and ask change as people modify their orders. The last price only changes when there's an execution. People change their orders as conditions change, as frequently as several times a second, but an execution only occurs when two parties agree on a price, and there can be minutes or even hours between executions; during this time the bids and asks are still changing. On a future with frequent executions, such as ES, the last price rarely lies outside the bid-ask spread. On a future like YG, the last price can be several dollars away from the bid-ask because the last execution may have been several hours ago.
More...

Thanks. That explains alot!

txuk · Jul 9, 2006

Quote from MTE: Obviously, the trade can take place inside the bid/ask spread.
More...

I've seen this come through on T&S, but I've never been clear on how this is possible.

Take ES and assume a gap in the spread: 1270.0 x 1270.5. How is it possible that I execute in between the B/A at 1270.25?

If I enter a buy market I get filled at the ask.

If I enter a buy limit at 1270.25 then I become the new best bid and there is no longer a gap in the spread.

Log in or Sign up

How Execution Works

cscott

txuk