Trace: A Market Order Is Executed

The Flow

Trader → Broker → Exchange → Matching Engine → Order Book → Trade Log → Confirmation

Step by Step

1. Trader submits order — A trader's algorithm sends a market order: "BUY 100 shares of AAPL immediately."

2. Broker routes the order — The broker acts as an intermediary, forwarding the order to the exchange via a low-latency network connection.

3. Matching engine receives order — The exchange's matching engine (a high-performance C++ program) loads the order into memory.

4. Engine checks the order book — The engine looks at the ask side (lowest sell orders first):

   • Level 1: 100.05 × 30 shares
   • Level 2: 100.06 × 200 shares

5. First match — The market order buys all 30 shares at the best ask of 100.05. Remaining: 70 shares.

6. Second match — The market order buys 70 shares at the next ask price of 100.06. Order is now complete.

7. Trade log is written — Two fills are recorded:

   • 30 shares @ 100.05 = $3,001.50
   • 70 shares @ 100.06 = $7,004.20
   • Total: 100 shares for $10,005.70

8. Confirmation sent back — The trader's system receives a confirmation: "BUY 100 AAPL at avg price 100.06."

Key Takeaways

• A market order always fills at the best available prices.
• Large orders sweep through multiple price levels — this is called market impact or slippage.
• The matching engine must be fast — every millisecond matters in high-frequency trading.