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Orders, Execution & Market Structure

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Orders, Execution & Market Structure

Immediate-or-Cancel Order

An order that executes whatever quantity is available at once and cancels the remainder rather than resting in the book.

Test: any unfilled quantity is cancelled immediately on submission instead of joining the order book qualitative Orders, Execution & Market Structure

Impact Cost

The cost, expressed as a percentage, of executing a stated order size against the current order book relative to the mid price.

Impact Cost % = (Actual Execution Price - Ideal Mid Price) / Ideal Mid Price x 100 % Orders, Execution & Market Structure

Latency

The time elapsed between sending an instruction and its effect being registered by the exchange.

Round-Trip Latency = time from order transmission to receipt of the exchange's acknowledgement qualitative Orders, Execution & Market Structure

Limit Order

An instruction to buy at or below, or sell at or above, a stated price, executing only if the market reaches it.

Test: the order carries a price condition and rests in the book until matched, cancelled or expired qualitative Orders, Execution & Market Structure

Lower Circuit

The state in which a security is trading at the bottom of its permitted price band, with sell orders pending and no buyers.

Lower Circuit Price = Previous Close x (1 - Band %) ₹ Orders, Execution & Market Structure

Market Depth

The quantity of shares available at each price level on both sides of the order book.

Depth at a level = total quantity of resting orders at that price on the relevant side shares Orders, Execution & Market Structure

Market Maker

A participant that continuously quotes both a bid and an ask, standing ready to buy or sell and earning the spread.

Gross Earnings = Bid-Ask Spread x Volume Transacted, less losses from adverse price moves on inventory ₹ Orders, Execution & Market Structure

Market Order

An instruction to buy or sell immediately at the best price currently available in the order book.

Test: the order specifies quantity but no price, and executes against resting orders until filled qualitative Orders, Execution & Market Structure

Novation

The legal substitution by which a clearing corporation replaces the original trade with two new contracts, becoming counterparty to both…

Test: one bilateral contract is replaced by two contracts, each with the clearing corporation as the opposite party qualitative Orders, Execution & Market Structure

Off-Market Transfer

A movement of securities between demat accounts that is settled directly through the depository rather than through an exchange trade.

Test: securities move by depository instruction without an exchange trade and without clearing corporation involvement qualitative Orders, Execution & Market Structure

Open Order

An order that has been accepted by the exchange but not yet executed, cancelled or expired.

Test: the order rests in the book with unexecuted quantity remaining and validity not yet lapsed qualitative Orders, Execution & Market Structure

Order Book

The exchange's live record of all unexecuted buy and sell limit orders in a security, ranked by price and then by time.

Test: an order rests in the book until it is matched, modified, cancelled, or expires at the session close qualitative Orders, Execution & Market Structure

Order Matching

The exchange process that pairs a buy order with a sell order at a compatible price to create a trade.

Test: a trade occurs when the best bid price is greater than or equal to the best ask price qualitative Orders, Execution & Market Structure

Order-to-Trade Ratio

The number of orders a participant submits for each trade actually executed, used by exchanges to price message traffic.

Order-to-Trade Ratio = Total Orders Submitted (including modifications and cancellations) / Number of Trades Executed ratio (x, times) Orders, Execution & Market Structure

Partial Fill

The execution of only part of an order's quantity, with the remainder either resting in the book or cancelled.

Filled Quantity < Order Quantity, with the unfilled balance either resting or cancelled per the order's validity shares Orders, Execution & Market Structure

Pay-In

The stage of settlement at which members deliver securities and funds owed to the clearing corporation.

Test: on the settlement date, net obligations are transferred from members to the clearing corporation by the pay-in deadline qualitative Orders, Execution & Market Structure

Pay-Out

The stage of settlement at which the clearing corporation distributes securities and funds to the members entitled to them.

Test: after pay-in is complete, net entitlements are transferred from the clearing corporation to members and onward to clients qualitative Orders, Execution & Market Structure

Post-Closing Session

A short window after the main session in which orders execute at the day's official closing price rather than at a negotiated one.

Test: all trades in the window execute at the previously determined closing price, with no price discovery qualitative Orders, Execution & Market Structure

Pre-Open Session

The window before continuous trading begins in which orders are collected and matched in a call auction to set the opening price.

Test: orders may be entered and modified during the collection window but execute only at the single auction price qualitative Orders, Execution & Market Structure

Price Band

The maximum percentage a security may move from its previous close in a session before orders outside the range are rejected.

Upper Band = Previous Close x (1 + Band %); Lower Band = Previous Close x (1 - Band %) % Orders, Execution & Market Structure

Price Discovery

The process by which the interaction of buy and sell orders produces a price that reflects the market's aggregate view.

Test: price emerges from competing orders rather than being set administratively or by a single participant qualitative Orders, Execution & Market Structure

Price-Time Priority

The rule by which an exchange ranks orders for matching: better prices first, and among equal prices, whichever arrived earlier.

Rank = better price first; among equal prices, earlier timestamp first qualitative Orders, Execution & Market Structure

Rolling Settlement

A system in which every trading day is a separate settlement cycle, so trades settle a fixed number of days after execution.

Test: each trade date has its own settlement date; there is no fixed weekly or fortnightly settlement day qualitative Orders, Execution & Market Structure

Settlement Cycle

The number of trading days between a trade's execution and the actual exchange of securities and money.

Settlement Date = Trade Date + N trading days, where N is 1 for the Indian T+1 equity cycle days