What is the opening price if limit orders are executed on both sides of the order book?

What is the opening price if limit orders are executed on both sides of the order book?

• A. Side with the larger order volume determines opening price
• B. Arithmetic mean of last two traded prices
• C. Last price
• D. Reference price

Answer: (A)

At the opening, price discovery is driven by where the strongest interest sits in the book. If there is more resting volume on one side (the side placing more limit orders), that side dictates the opening price because it represents the greater willingness to trade at those prices. The market moves to the price level that can clear the larger side’s demand or supply, anchoring the opening price to that imbalance. The other options aren’t used to set the opening price in this context: it isn’t simply the last traded price, nor an average of recent trades, nor a separate reference price. Instead, the side with the larger order volume determines where the opening price is established.

At the opening, price discovery is driven by where the strongest interest sits in the book. If there is more resting volume on one side (the side placing more limit orders), that side dictates the opening price because it represents the greater willingness to trade at those prices. The market moves to the price level that can clear the larger side’s demand or supply, anchoring the opening price to that imbalance. The other options aren’t used to set the opening price in this context: it isn’t simply the last traded price, nor an average of recent trades, nor a separate reference price. Instead, the side with the larger order volume determines where the opening price is established.