Question

When two orders have the same price, how are they prioritized?

• A. By the size of the order
• B. By the type of the order
• C. Based on the time they were entered
• D. By the broker's preference
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Hint:

In electronic markets, matching is governed by the FIFO (First-In, First-Out) time rule for orders at the same price level. Every millisecond counts.

Answer 1

The Correct Option is C

Step 1: Understanding Order-Matching Engines:
Electronic stock exchanges run fully automated order books. When buy and sell orders are received, they are pooled and matched based on standardized priority rules.

Step 2: Explaining Price Priority:
The primary matching rule is Price Priority. The system always prioritizes the best prices:
• For buy orders, the highest bid price is matched first.
• For sell orders, the lowest ask price is matched first.

Step 3: Explaining Time Priority:
If multiple orders are submitted at the exact same price, the system resolves this tie using Time Priority. The order that was entered into the system first is matched first. This system of Price-Time Priority (C) ensures that early orders are filled fairly.