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Quant engineering · Module 05

Markets

How an exchange matches orders, and how market makers set prices.

Start with: What an exchange is
Start here · Lesson 01

What an exchange is

Buyers and sellers wait at their prices, kept in one order book.

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LessonsAll lessons

  1. 01 What an exchange isBuyers and sellers wait at their prices, kept in one order book. Free
  2. 02 Price-time priorityBest price first, then first come, first served at each price. Free
  3. 03 Matching a tradeAn order that crosses the spread trades at the waiting orders' prices. Free
  4. 04 Order types, cancels and amendsRules you attach to an order, and when changing it costs your place. Pro
  5. 05 Data feeds and rebuilding the bookEvery change goes out as a numbered message, and you rebuild the book. Pro
  6. 06 The opening auctionFinding the one price that matches the most shares. Pro
  7. 07 You are the market makerQuote a bid and an ask, and meet traders who know more than you. Pro
  8. 08 Make a market on a numberThe interview game: fair value in the middle, half the spread per trade. Pro
  9. 09 Informed tradersEvery trade is a clue, and the spread pays for what it reveals. Pro
  10. 10 InventoryShares you never chose to hold, and how far to lean your quotes. Pro
  11. 11 Reading the bookMore size on one side hints at the next small move. Pro
  12. 12 Queue position and feesYour place in line and the fee schedule decide which fills pay. Pro
  13. 13 Latency and speed racesWhere the microseconds go, and why firms race for them. Pro
  14. 14 Fast data structuresWhy trading code keeps prices as whole numbers and memory close by. Pro
  15. 15 Risk limits and the kill switchChecks before every order, and the switch that stops everything. Pro