# Order Matching, Depth & Out of hours trading



## GreatPig (31 August 2004)

*Buy & Sell Order Matching*

Can someone explain to me exactly how the electronic system matches up buy and sell orders?

As a simple example, say you wanted to sell 4000 shares in some stock at $1, that being the highest bid, and the market depth screen showed the current bids as:

1000 @ $1
2000 @ $1
5000 @ $1
1000 @ $1
etc.

Would your 4000 take the 1000, the 2000, and then 1000 from the 5000 order, or perhaps jump the 5000 and take the next 1000? Does the system automatically settle partial amounts?

And say the 5000 and later offers were only for 99 cents.

1000 @ $1.00
2000 @ $1.00
5000 @ $0.99
1000 @ $0.99
etc.

Would you then get 3000 of your 4000 order settled with the remaining 1000 left in the system?

Just trying to understand how this works.

Cheers,
GP


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## RodC (31 August 2004)

*Re: Buy & Sell Order Matching*

Yes, in the first case you would get the 1000, the 2000 and the first 1000 from 5000 order. The orders (at the same price) are filled in the order they are submitted.

You are also correct in the 2nd case, your order would be partially filled with the remainder still in the system.  I've seen this happen several times online with some of my orders, they often take several "bites" to fill.

regards,

Rod


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## GreatPig (31 August 2004)

*Re: Buy & Sell Order Matching*

Rod,

Thanks. I thought it worked like that but wasn't sure.

Another question regarding brokerage. I assume brokerage is not charged until an order has been filled, so if you place an order and then later cancel it unfilled, there'd be no brokerage?

And if you cancelled an order after it was partially filled (if that's possible), you'd only be charged brokerage on the amount filled?

Cheers,
GP


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## Bingo (31 August 2004)

*Re: Buy & Sell Order Matching*

Correct, however, you will be charged the minimum (if first partial fill less than minimum) on the first and then zero until it catched up.

Suppose brokerage 0.1% with a minimum of $30, and order is partially filled as below.

1. $5,000     Brokerage $30
2. $5,000     Brokerage $ 0
3. $20,000   Brokerage $ 0
4. $10,000   Brokerage $10 

So if you cancelled after the first partial fill you pay the minimum brokerage.

Bingo


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## GreatPig (31 August 2004)

*Re: Buy & Sell Order Matching*

Thanks, Bingo.

Cheers,
GP


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## jkool (2 September 2004)

*Re: Buy & Sell Order Matching*

I have related question about something I cant figure out:

Every day before the market opens people seem to place BUY orders at prices way above the last day close. Why is that? 

Is that because whoever lists higher on the offers list (based on the offer price) gets his purchase faster or at lower average price? I mean why would you at normal circumstances (ie no takovers, exdivs etc on horizon) offer price say +5% to the price at which a share closed last trading day?


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## Bingo (2 September 2004)

*Re: Buy & Sell Order Matching*

Yes, and as soon as the market closes the buy sell quotes change such that the sell is lower than the buy. Reminds me of the old days when bookmakers would spin the odds boards as soon as the race jumped. Its' how I tell trading has ceased. Why is this?

Bingo


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## stefan (7 September 2004)

*Re: Buy & Sell Order Matching*

This calle the pre-open phase. The way it works is as follows:

There are often bids higher than asks when a stock is in "pre-open". In this phase buyers and sellers can place their orders onto the market, however no trades occur until the market opens. Once the market does open, the opening price is determined by the weighted algorithm, determined by the buyers and sellers in the market for that particular stock. Any buyers bidding above the opening price will buy at the opening price and any sellers offering their shares below the opening price will sell at the opening price.

The market stops trading at 4.00pm, after which it enters a phase in which orders can be entered, amended or deleted, but do not trade. At a random time between 4.05pm and 4.06pm the market undergoes a closing price auction. The algorithm used to determine this closing price is the same as that used for the opening price described above.

Hope this helps. 

Happy trading

Stefan


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## Bingo (7 September 2004)

*Re: Buy & Sell Order Matching*

stefan,

Thank you. This has had me perplexed for some time.


Bingo


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## jkool (9 September 2004)

*Re: Buy & Sell Order Matching*

Stefan: 
All right then. Now it all start making sense to me. 
The algorithm must also be the reason behind an opening price of one day being different to the closing price of the previous day. Ain't it? 

Thanks for info - I am finally gonna get some sleep at night


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## kifoghorn (9 September 2004)

*Re: Buy & Sell Order Matching*



			
				jkool said:
			
		

> Stefan:
> All right then. Now it all start making sense to me.
> The algorithm must also be the reason behind an opening price of one day being different to the closing price of the previous day. Ain't it?
> 
> Thanks for info - I am finally gonna get some sleep at night



doesn't some of it got to do with after trading transcations?


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## sam21poddy (11 February 2005)

*Out of hours trading*

Why is it that sometimes when you look at the course of sales, trades occur before or after the market has closed?  WMR trading has been suspended today because Peter Costello is going to give an announcement whether or not the Xstrata takeover will be allowed.  But when I look at the course of sales, there is a trade for 1 million shares at $7.50 at 7.30am this morning.  I frequently see trades that go through at 5.30pm after the market has closed?  Why is this allowed and who is doing it?


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