Markets · 6 pages · 12 min

Why a market order can fill far from the last price

A market order takes live quotes, so a thin book or a gap can fill it far from the last trade.

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From the opening

The last price is only what the most recent trade paid, for whatever size that trade happened to be. A market order takes the quotes standing now, so if those quotes are far from the last print, or the order is larger than the size at the first quote, the fill can land far from that print. The opening covers the last trade is history, the order walks the live book, and thin size worsens the average.

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Inside

The last trade is history
The order walks the live book
Thin size worsens the average
Opens can gap past the close
Where the idea stops applying
A distinction worth keeping

Sources

Order-book walk and slippage
Last sale versus quoted market

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Why a market order can fill far from the last price

From the opening

Inside

Sources

Also on the desk