Which rule applies when a quote meets another quote during continuous trading?

Which rule applies when a quote meets another quote during continuous trading?

• A. At limit
• B. At quote (Quote domination rule)
• C. At quote already in order book
• D. At reference price

Answer: (B)

When two resting quotes on opposite sides meet during continuous trading, the system needs a clear rule to pick the price. The rule in play is the quote domination rule: the trade occurs at the price of the dominating quote—the quote that currently controls the market at that moment. This means the execution price is simply the price shown by the quote that has priority, ensuring a deterministic and fair outcome. So if the bid and ask cross, you don’t use a separate reference price or a limit price—the price is the quote that dominates at the instant of crossing. If there are ties at the same price, the exchange’s priority rules decide which quote dominates, and the trade is executed at that price.

When two resting quotes on opposite sides meet during continuous trading, the system needs a clear rule to pick the price. The rule in play is the quote domination rule: the trade occurs at the price of the dominating quote—the quote that currently controls the market at that moment. This means the execution price is simply the price shown by the quote that has priority, ensuring a deterministic and fair outcome.

So if the bid and ask cross, you don’t use a separate reference price or a limit price—the price is the quote that dominates at the instant of crossing. If there are ties at the same price, the exchange’s priority rules decide which quote dominates, and the trade is executed at that price.