Which price source is used to settle a market order against a market order in an auction?

Which price source is used to settle a market order against a market order in an auction?

• A. Reference price
• B. Limit price
• C. Mid price
• D. Last traded price

Answer: (A)

In an auction, price discovery yields a single clearing price for all matched orders. When two market orders are paired in an auction, the system uses a reference price as the anchor to determine that clearing price. The reference price provides a fair, current-market baseline around which the auction price is set, ensuring the trade reflects the market context at that moment. The last traded price is historical and may not represent the immediate supply-demand balance, the mid price is just a theoretical halfway point between the current best bid and offer and isn’t used as the official settlement price in the auction, and a limit price isn’t applicable to market orders since they carry no price constraint.

In an auction, price discovery yields a single clearing price for all matched orders. When two market orders are paired in an auction, the system uses a reference price as the anchor to determine that clearing price. The reference price provides a fair, current-market baseline around which the auction price is set, ensuring the trade reflects the market context at that moment.

The last traded price is historical and may not represent the immediate supply-demand balance, the mid price is just a theoretical halfway point between the current best bid and offer and isn’t used as the official settlement price in the auction, and a limit price isn’t applicable to market orders since they carry no price constraint.