Question

Which is NOT correct regarding continuous double auction?

A.Execution follows price-time priority

B.Existing bids are always at lower prices than existing asks

C.Trades occur when bid and ask cross

D.To buy the security, the trader needs to submit an ask order

Answer 1

The correct option is "D"

To Buy a security a security a trader needs to submit a bid order while ask order is submitted by seller. In continuous double auction existing bids are always at lower price than existing asks and trade occurs when bid and ask price crosses each other because equilibrium price is determined and all the other order remains untraded. Most of the continuous double auction price-time priority execution is followed means orders are executed on the best price and similarly an order with the best time (earliest) is traded first.