Difference in Execution between Limit Orders at Daily Price Limits and Market Orders

In a case where a limit order is placed at the upper (lower) price limit, there may be an argument that a market order still has the price priority. However, as all orders cannot be quoted beyond the price limits, the market order is deemed as an upper (lower) price limit order.


With regard to the priority between a market order deemed as an upper (lower) price limit order and a limit order at the upper (lower) price limit, considering that a limit order is not able to have better price due to the price limit, both the buying (selling) limit order at the upper (lower) price limit and the buying (selling) market order are deemed to have the same price priority.


The difference between a market order and a limit order at price limit depends on the order quantity. That is, if the order quantity of counter-party is larger than that of the market order or the limit order at the upper (lower) price limit, there is not any difference. However, if the counter-party's order quantity is smaller, then the market order is matched at a better price.


In a continuous trading, difference comes from the existence of a preceding order. That is, if the counter-party's order has the time priority, there is no difference. However, if the counter-party's order arrived later, then the market order is more likely to be matched at a better price. The limit order, however, has the advantage of expecting the price to be matched to a certain extent.

Difference in Execution between Limit Orders at Price Limits and Market Orders
Example of single price auction: Case 1.

There is no difference because the matched price is the same in case where the counter-party has the same as or larger quantity.

Example of single price auction: Case 1.
Market Orders Orders at Upper Price Limit
Asks Price Bids Asks Price Bids
  Market Order 100   Market Order  
Upper Price Limit 11,500   Upper Price Limit 11,500 100
  10,600     10,600  
  10,550     10,550  
200 10,500 100
(Deemed Price)		 200 10,500  
  10,450 100   10,450 100
Last Traded Price 10,000   Last Traded Price 10,000  
Execution Price : 10,500 Execution Price: 10,500 (The price of a larger quantity order)
Example of single price auction: Case 2.

In a case where the counter-party has smaller quantity, the market order is matched at 10,500 while the limit order at price limit, at 11,500, the upper price limit, which makes the market order more advantageous.

Example of single price auction: Case 2.
Market Orders Orders at Upper Price Limit
Asks Price Bids Asks Price Bids
  Market Order 200   Market Order  
Upper Price Limit 11,500   Upper Price Limit 11,500 200
  10,600     10,600  
  10,550     10,550  
100 10,500 200
(Deemed Price)		 100 10,500  
  10,450 100   10,450 100
Last Traded Price 10,000   Last Traded Price 10,000  
Execution Price : 10,500 Execution Price : 11,500 (The price of a larger quantity order)
Example of multiple price auctions: Case 1.

In a case where the counter-party order came later, the market order is matched at 10,550, while the limit order at price limit, at 11,500, which proves the market order is more advantageous.

Example of multiple price auctions: Case 1.
Market Orders Orders at Upper Price Limit
Asks Price Bids Asks Price Bids
  Market Order ② 100   Market Order  
Upper Price Limit 11,500   Upper Price Limit 11,500 ② 100
  10,600     10,600  
③ 200 10,550 100
(Deemed Price)		 ③ 200 10,550  
  10,500 ① 200   10,500 ① 200
  10,450     10,450  
Last Traded Price 10,000   Last Traded Price 10,000  
Execution Price : 10,550 (The price of the preceding order) Execution Price : 11,500 (The price of the preceding order)
Example of multiple price auctions: Case 2.

In a case where the counter-party order came first, both the market order and the limit order at price limit are matched at the same price, making no difference.

Example of multiple price auctions: Case 2.
Market Orders Orders at Upper Price Limit
Asks Price Bids Asks Price Bids
  Market Order ③ 200   Market Order  
Upper Price Limit 11,500   Upper Price Limit 11,500 ③ 200
  10,600     10,600  
② 100 10,550 100
(Deemed Price)		 ② 100 10,550  
  10,500 ① 100   10,500 ① 100
  10,450     10,450  
Last Traded Price 10,000   Last Traded Price 10,000  
Execution Price : 10,550 (The price of the preceding order) Execution Price : 10,550 (The price of the preceding order)