In an auction, when a limit is matched against another limit and the limits differ but volumes are different, what is the outcome?

In an auction, when a limit is matched against another limit and the limits differ but volumes are different, what is the outcome?

• A. Arithmetic mean of two limits
• B. Reference price
• C. At limit already in order book
• D. Limit with higher volume

Answer: (D)

In a call auction, price discovery aims to find a single clearing price that lets as much as possible be traded given all opposing limits. When two limits cross but the volumes differ, the price that clears the market is determined by the side with the larger volume—the limit price of that side. The actual traded quantity is the smaller of the two volumes, leaving any excess on the larger side unmatched. This is why the outcome is described as the limit with higher volume setting the price. The other options don’t reflect how the clearing price is chosen: an arithmetic mean isn’t used for matching limits, a reference price is a separate benchmark, and the price isn’t simply “whatever is already in the book” unless it coincides with the clearing condition.

In a call auction, price discovery aims to find a single clearing price that lets as much as possible be traded given all opposing limits. When two limits cross but the volumes differ, the price that clears the market is determined by the side with the larger volume—the limit price of that side. The actual traded quantity is the smaller of the two volumes, leaving any excess on the larger side unmatched.

This is why the outcome is described as the limit with higher volume setting the price. The other options don’t reflect how the clearing price is chosen: an arithmetic mean isn’t used for matching limits, a reference price is a separate benchmark, and the price isn’t simply “whatever is already in the book” unless it coincides with the clearing condition.