medium · Market Microstructure
A limit order book uses price-time priority. A limit buy order for 5,000 shares sits at 10.00, and it is at the back of a 50,000-share queue at that price level. A market sell order for 30,000 shares arrives and is matched against the 10.00 bid.
What is the status of our limit order after the match, and what microstructure risk is the order exposed to while waiting in the queue?
- The limit order is fully filled because market orders always execute all resting orders at a price level
- The limit order is cancelled automatically because market depth is insufficient
- The limit order is partially filled for 5,000 shares because it is the last in queue
- The limit order is not filled at all; it remains in the queue with 50,000 shares still ahead of it that were not consumed by the 30,000-share market order; the primary risk is that the price moves down to 9.99 before the order reaches the front
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