market architecture of selected stock exchanges in ... - Gilles Daniel

35Orders without Price LimitMarket orders are unpriced buy or sell orders. They are to be executed at market thatis at the best price available, namely at the lowest ask posted by sellers, or thehighest bid price posted by buyers (Beiner and Schwartz 2001). Hence, marketorders guarantee immediacy of execution with no certainty of the price.Orders with a Price LimitLimit orders are to be executed at their specified limit or better. A limit buy ordersets the maximum price at which the trader will buy; a limit sell order sets theminimum price at which the trader will sell (Beiner and Schwartz 2001).Limit orders that do not execute are held on the market by being entered in a limitorder book. They remain active on the book until they execute, are cancelled by theclient or expire (Schwartz 1988).AcronymThe different stock exchanges may use acronyms for ease of communication andprevention of confusion in trading.Execution conditionThere are several possibilities to specify an order. Execution conditions specify whatexactly happens between order entry and after execution. In general, they can bedefined as persistent or non-persistent. Orders without any execution constraint willexecute as far as possible and add the remainder to the order book where they waitfor execution or cancellation. These orders are described to be persistent. Orderswith execution constraint are described as non-persistent since they never reside inthe order book:“Execute and Eliminate” (or “Immediate and Cancel”, “Fill and Kill”) orders arematched immediately and as fully as possible upon entry into the order book. Theremaining unexecuted volume is deleted from the order.“Fill or Kill” (or “Immediate or Cancel”) orders are either matched immediately andcompletely or, if full execution is not possible, the entire order is rejected from theorder book without any partial execution. Fill or Kill orders are another example ofnon-persistent orders and never reside on the order book.