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This is a really simple question but I can’t figure it out. I was given this definition for trades in an order book. “A bid and an offer whose prices are the same or cross will pair, resulting in a trade. We consider bid and offer prices to cross when the bid price is higher than the offer price; in those cases, a trade will occur at the price of the older order”

I’m a little bit confused about the price point at which the trade occurs when there is a cross. For example, if the order book contained an offer of 100 dollars for 10 shares. If a bid comes in that is 105 dollars for 10 shares. Would the trade occur at 105 dollars or 100 dollars? I feel like it should be 105 dollars but I’m not sure what the older order means. Would the offer of $100 be considered the older order since it’s already in the book?

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  • $\begingroup$ Yes, $100 because it's the passive order. $\endgroup$
    – hroptatyr
    Commented Nov 14, 2023 at 7:28

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I assume you are referring to Jane Street Order Book guide? It would occur at 100. Older order means whichever of bid or sell comes first, that will be the price at which the trade is executed.

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