Accounts Notes: TYPES OF ORDER BOOKS

Friday 25 March 2011

TYPES OF ORDER BOOKS

As has been explained above, a member has various options regarding the type of order he wants to place. When an order is received it is given a unique number and a unique time stamp. In case, an order could not be matched, then they are stored in a different book in price – time priority in the following sequence.
• Best price
• Within price, by time priority.
Thus when two orders are entered at the same time the one with a better price gets priority. Similarly, incase two orders were entered at the same price; the one which was entered earlier gets priority.
The following types of books are maintained in the Capital Market
i. Regular Lot Book – This book contains only regular lot orders and order do not have any of the following attributes attached to them.
• All or Non (AON)
• Minimum fill (MF)
• Stop Loss (SL)
ii. Special Term Book – All the orders, which have any of the following attributes, are recorded in this book. They are –
• All or NON (AON)
• Minimum Fill (MF)
iii. Stop-Loss Book –
 Stop loss orders are stored in this book till the trigger price is reached or surpassed.
 When the trigger price is reached or surpassed, the order is released in the regular lot book.
 The stop loss conditions are met under the following circumstances.
• Buy order – a buy order in the stop loss book gets triggered when the last traded price in the normal market reaches or exceeds the trigger price of the order.
• Sell order – a sell order in a stop loss book gets triggered when the last traded prices in the regular market reaches or falls below the trigger price of the order.
iv. Odd Lot Book – The odd lot book contains all orders with lot size lesser than the marketable lot.
v. Spot Book – The spot book contains all orders having different settlement periods only. The system attempts to match an active spot order with a passive spot order in the book.
vi. Auction Book – Auction Book contains orders that are entered for all auctions.
ORDER MATCHING RULES
(i) The best buy-order is matched with the best sell order.
(ii) It is obvious that a seller would like to sell at the highest available price.
(iii) Thus, the best buy-order is the one with the highest price.
(iv) At the same time, a buyer would like to buy at the lowest available price.
(v) Thus the best sell-order is the one with the lowest price.
(vi) Thus the trading system tries to find for the seller the best possible buying price and the best possible selling price for the buyer.