In an auction, if two limits are matched with identical volumes but different price levels, the trade price is what?

In an auction, if two limits are matched with identical volumes but different price levels, the trade price is what?

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

Answer: (C)

When two limit orders with the same quantity cross at different price levels, the trade is executed at the midpoint of those two limits. This arithmetic mean reflects a fair compromise between the buyer’s maximum price and the seller’s minimum price, ensuring neither side gets the full advantage of their limit. For example, if one limit is willing to buy at 100 and the other is willing to sell at 98 for the same amount, the trade price is (100 + 98) / 2 = 99. The other options don’t fit because the price isn’t chosen from the higher-volume limit, a reference price, or at exactly one of the limits.

When two limit orders with the same quantity cross at different price levels, the trade is executed at the midpoint of those two limits. This arithmetic mean reflects a fair compromise between the buyer’s maximum price and the seller’s minimum price, ensuring neither side gets the full advantage of their limit. For example, if one limit is willing to buy at 100 and the other is willing to sell at 98 for the same amount, the trade price is (100 + 98) / 2 = 99. The other options don’t fit because the price isn’t chosen from the higher-volume limit, a reference price, or at exactly one of the limits.