5

Consider some exchange, e.g. Mt. Gox, with just two users, Alice and Bob. If Alice places a sale order limited above 90$, and Bob places a buy order limited below 110$, at what rate will the exchange take place?

3

It depends on who posts the order first.

If Alice posts first a sell at 90, then Bob posts a buy at 110, Bob will buy from Alice at 90, and any excess will be posted as a buy at 110 (if he wanted to buy more than Alice sold).

If Bob posted first a buy at 110, then Alice posted a sell at 90, the opposite would happen: Alice would sell to Bob at 110, and any excess would be posted as a sell at 90 (if she wanted to sell more than Bob wanted to buy).

  • Thanks! Can you point me to a reference as well? – stanga Apr 2 '13 at 13:14
  • @stanga there are plenty of resources explaining limit orders, but they don't address it exactly your question, since they take it for granted. Wasn't able to find you one, sorry. – o0'. Apr 2 '13 at 13:52

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