How is the actual trade on exchanges processed for simple stock orders?
"The simple answer is, there are many ways for trades to take place.  Some systems use order-matching software that employs proprietary algorithms for deciding the order of processing, others use FIFO structures, and so on.  Some brokerages may fill customer orders out of their own accounts (which happens more frequently than you might imagine), and others put their orders into the system for the market makers to handle.  There's no easy all-encompassing answer to your question, but it's still a good one to ask. By the way, asking if the market is ""fair"" is a bit naive, because fairness depends on what side of the trade you came out on! (grin)  If your limit order didn't get filled and you missed out on an opportunity, that's always going to seem unfair, right?"
"That article, like almost any article written by a non-expert and quoting only ""research"" from lobbying groups, hugely misses the point. The vast majority of orders that end up being cancelled are cancelled as a standard part of exchanges' official market-maker programs. Each exchange wants you and me to know that it has liquidity -- that when we go to buy or sell some stock, there will be someone waiting on the other side of the trade.  So the exchange pays (via lowered fees or even rebates) hundreds of registered market makers to constantly have orders resting in each product's order book within a few ticks of the current NBBO or the last trade price.  That way, if everyone else should suddenly disappear from the market, you and I will still be able to trade our shares for a price somewhat close to the last trade price. But market makers who are simply acting in this ""backstop"" role don't actually want to have their orders filled, because those orders will almost always lose them money. So as prices rise and fall (as much as tens of times per second), the market makers need to cancel their resting orders (so they don't get filled) and add new ones at new prices (so they meet their obligations to the exchange).  And because the number of orders resting in any given product's order book is vastly larger than the number of actual trades that take place in any given time period, naturally the number of cancellations is also going to hugely outweigh the number of actual trades.  As much as 97% to 3% (or even more). But that's completely fine! You and I don't have to care about any of that.  We almost never need the market makers to be there to trade with us.  They're only there as a backstop.  There's almost always plenty of organic liquidity for us to trade against.  Only in the rare case where liquidity completely dries up do we really care that the registered market makers are there.  And in those cases (ideally) the market makers can't cancel their orders (depending on how well the exchange has set up its market maker program). So, to answer your question, the effect of standard order cancellation on a stock is essentially none.  If you were to visualize the resting orders in a product's book as prices moved up and down, you would essentially see a Gaussian distribution with mean at the last trade price, and it would move up and down with the price.  That ""movement"" is accomplished by cancellations followed by new orders. P.S. As always, keep in mind that your and my orders almost never actually make it to a real stock exchange anymore.  Nowadays they are almost always sent to brokers' and big banks' internal dark pools.  And in there you and I have no idea what shenanigans are going on.  As just one example, dark pools allow their operators and (for a fee) other institutional participants access to a feature called last look that allows them to cancel their resting order as late as after your order has been matched against it! :( Regarding the question in your comment ... If Alice is sending only bona fide orders (that is, only placing an order at time T if, given all the information she has at time T, she truly wants and intends for it to be filled) then her cancellation at a later time actually adds to the effectiveness of and public perception of the market as a tool for price discovery (which is its ultimate purpose). [In the following example imagine that there are no such things as trading fees or commissions or taxes.] Let's say Alice offers to buy AAPL at $99.99 when the rest of the market is trading it for $100.00.  By doing so she is casting her vote that the ""fair value"" of a share of AAPL is between $99.99 and $100.00. After all, if she thought the fair value of a share of AAPL was higher --  say, between $100.00 and $100.01 -- then she should be willing to pay $100.00 (because that's below fair value) and she should expect that other people in the market will not soon decide to sell to her at $99.99. If some time later Alice does decide that the fair value of AAPL is between $100.00 and $100.01 then she should definitely cancel her order at $99.99, for exactly the reason discussed above.  She probably won't get filled at $99.99, and by sitting there stubbornly she's missing out (potentially forever) on the possibility to make a profit. Through the simple act of cancelling her $99.99 order, Alice is once again casting a vote that she no longer thinks that's AAPL's fair value.  She is (very slightly) altering the collective opinion of the entire market as to what a share of AAPL is worth.  And if her cancellation then frees her up to place another order closer to her perceived fair value (say, at $100.00), then that's another vote for her honest optinion about AAPL's price. Since the whole goal of the market is to get a bunch of particpants to figure out the fair value of some financial instrument (or commodity, or smart phone, or advertising time, etc.), cancellations of honest votes from the past in order to replace them with new, better-informed honest votes in the present can only be a good thing for the market's effectiveness and perceived effectiveness. It's only when participants start sending non-honest votes (non bona fide orders) that things start to go off the rails.  That's what @DumbCoder was referring to in his comment on your original question." As you probably know, a credit spread involves buying a call (or put) at one strike and selling another call (or put) at another with the same maturity, so you're dealing with two orders. Your broker will likely have to fill this order themselves, meaning that they'll have to look at the existing bid/asks for the different strikes and wait until the difference matches (or exceeds) your limit order.  Obviously they can't place limit orders on the legs individually since they can't guarantee that they will both be executed.  They also don't care what the individual prices are; they just care what the difference is.  It's possible that they have computer systems that examine existing bids and asks that would fill your order, but it's still done by the broker, not the exchange.  The exchange never sees your actual limit order; they will just see the market orders placed by your broker. "Very simple. You open an account with a broker who will do the trades for you. Then you give the broker orders to buy and sell (and the money to pay for the purchases). That's it. In the old days, you would call on the phone (remember, in all the movies, ""Sell, sell!!!!""? That's how), now every decent broker has an online trading platform. If you don't want to have ""additional value"" and just trade - there are many online discount brokers (ETrade, ScotTrade, TD Ameritrade, and others) who offer pretty cheap trades and provide decent services and access to information. For more fees, you can also get advices and professional management where an investment manager will make the decisions for you (if you have several millions to invest, that is). After you open an account and login, you'll find a big green (usually) button which says ""BUY"". Stocks are traded on exchanges. For example the NYSE and the NASDAQ are the most common US exchanges (there's another one called ""pink sheets"", but its a different kind of animal), there are also stock exchanges in Europe (notably London, Frankfurt, Paris, Moscow) and Asia (notably Hong Kong, Shanghai, Tokyo). Many trading platforms (ETrade, that I use, for example) allow investing on some of those as well." The situation you're proposing is an over-simplification that wouldn't occur in practice. Orders occur in a sequence over time. Time is an important part of the order matching process. Orders are not processed in parallel; otherwise, the problem of fairness, already heavily regulated, would become even more complex. First, crossed and locked markets are forbidden by regulators.  Crossed orders are where one exchange has a higher bid than another's ask, or a lower ask than another's bid.  A locked market is where a bid on one exchange is equal to the ask on another.  HFTs would be able to make these markets because of the gap between exchange fees. Since these are forbidden, and handling orders in parallel would ensure that a crossed or locked market would occur, orders are serialized (queued up), processed in order of price-time priority. So, the first to cross the market will be filled with the best oldest opposing order. Regulators believe crossed or locked markets are unfair.  They would however eliminate the bid ask spread for many large securities thus the bid-ask cost to the holder. You've said what's different in your question. There's 330 microseconds of network latency between IEX and anywhere else, so HFTs can't get information about trades in progress on IEX and use it to jump in ahead of those traders on other exchanges. All exchanges should have artificially induced latency of this kind so that if a trade is submitted simultaneously to all exchanges it reaches the furthest away one before a response can be received from the closest one, thus preventing HFT techniques. They are providing you a service and they charge you for it. The service includes giving you a trading platform(website and the infrastructure), doing all the background work for setting up services for you, relaying your orders to the market or as a broker fulfilling your orders, doing settlement when an order is matched, giving you access to the stock market(the costs are quite high to get a license to relay orders to the market and I believe it needs to be renewed every year). There are transaction fees which the stock exchanges charge the brokers to use the stock markets infrastructure and connect to it. And then interfacing with banks for monetary transactions and also doing according to the law in the jurisdiction they are located in. Most of it is an one time cost, but they are a private enterprise out to make profit so they will charge for their services. To answer your question in its entirety there's more information we need (exchange, session, traded security, order type, etc.). Most exchanges support partial fills, that is your order will be partially executed and modified.  In your example, you'd get an execution of 10 shares at $100, and your order ticket will be modified to $100 for 990 shares. Like John Bensin explained, there are ways to prevent partial filling through order modifiers (e.g. Fill-or-Kill). My addition here is, there are also ways to prevent the other bit, i.e. do the partial fill but don't keep a modified order in the system.  You'd have to mark the order Immediate-or-Cancel (IoC).  In your case you'd be partially filled (10 @$100) and that's it.  For the remaining 990 shares you'd have to enter a new order. There are lots of good answers on here already.  There are actually lots of answers for this question.  Lots.  I have years of experience on the exchange feed side and there are hundreds and thousands of variables.   All of these variables are funneled into systems owned by large financial institutions (I used to manage these - and only a few companies in the world do this so not hard to guess who I work for).  Their computers then make trades based on all of these variables and equations.  There are variables as whacky as how many times was a company mentioned in an aggregate news feed down to your basic company financials.  But if there is a way to measure a company (or to just guess) there is an equation for it plugged into a super computer at a big bank. Now there are two important factors on why you see this mad dash in the morning: Now most of the rest of the day is also automated trades but by the time you are an hour into market open the computers for the most part have fulfilled their calendar buys.  Everyone else's answer is right too.  There is futures contracts that change, global exchange info changes, options expiring, basic news, whatever but all of these are amplified by the calendar day changing. They don't have to track each other, it could just be listed on more than one exchange.  The price on one exchange does not have to match or track the price on the other exchange. This is actually quite common, as many companies are listed on two or more exchanges around the world. Basic arbitrage is the (near-)simultaneous purchasing and selling of things that are convertible.   The classic example is the international trading of equities. If someone in London wants to purchase a hundred shares of Shell for 40 GBP ea. and someone in New York wants to sell you a hundred shares of Shell for 61 USD ea., you can buy the shares from the guy in New York, sell them to the guy in London and convert your GBP back in to USD for a profit of $41.60 minus fees.  Now, if after you buy the shares in New York, the price in London goes down, you'll be left holding 100 shares of Shell that you don't want. So instead you should borrow 100 shares in London and sell them at the exact same time that you buy the shares in New York, thus keeping your net position at 0. In fact, you should also borrow 4000GBP and convert them to USD at the same time, so that exchange rate changes don't get you. "Exchange A has 100 shares of a stock at $10, the next 100 shares cost $10.01. Exchange B has the same pricing structure.  A fund manager wants to buy 200 shares of the stock, and decides that buying 100 shares at $10 from each exchange will be cheaper than staying in one exchange and paying $10.01 for the second half of his order.  The manager places two separate orders. Let's say the first order reaches exchange A, and the trade executes at $10. Traders (algorithms) on exchange B see this happen, and adjust their price up to $10.01 accordingly. Now, when the manager's order reaches exchange B, there will no longer be any shares trading at $10.  Some people say that this is front running, but if the manager only wanted 100 shares, the price would have still shifted. Some say this creates a more efficient market with tighter spreads due to the decreased risk to the market maker, but it also means the aggregate bid-ask offers across multiple exchanges are not necessarily accurate, creating a ""false liquidity"". You can decide for yourself whether or not this is a good thing." Many exchanges trade the same securities.  An order may be posted to a secondary exchange, but if the National Best Bid and Offer data provider malfunctions, only those with data feeds from that exchange will see it. Only the data provider for the primary exchange where a stock is listed provides the NBBO. Missing orders are very common with the NBBO data providers.  NASDAQ's order consolidator has had many failures over the past few years, and the data provider's top executive has recently resigned. Brokers have no control over this system.  A broker may be alerted to a malfunction by an accountholder, but a broker may only inform the relevant exchange and the relevant data provider. Also important to keep in mind is the difference in liquidity. The stock could be very liquid in 1 exchange but not in another. When times get bad, liquidity could dry up 1 one exchange, which results in a trading discount. Retail brokers and are generally not members of exchanges and would generally not be members of exchanges unless they are directly routing orders to those exchanges. Most retail brokers charging $7 are considered discount brokers and such brokers route order to Market Makers (who are members of the exchanges). All brokers and market makers must be members of FINRA and must pay FINRA registration and licensing fees.  Discount brokers also have operational costs which include the cost of their facilities, technology, clearing fees, regulation and human capital. Market makers will have the same costs but the cost of technology is probably much higher. Discount brokers will also have market data fees which they will have to pay to the exchanges for the right to show customer real time quotes.  Some of their fees can be offset through payment for order flow (POF) where market makers pay routing brokers a small fee for sending orders to them for execution. The practice of POF has actually allowed retail brokers to keep their costs lower but to to shrinking margins and spread market makers POF has significantly declined over the years.  Markets makers generally do not pass along Exchange access fees which are capped at $.003 (not .0035) to routing brokers.  Also note that The SEC and FINRA charges transactions fees. SEC fee for sales are generally passed along to customers and noted on trade confirms. FINRA TAF is born by the market makers and often subtracted from POF paid to routing firms. Other (full service brokers) charging higher commissions are charging for the added value of their brokers providing advice and expertise in helping investors with investment strategies. They will generally also have the same fees associated with membership of all the exchanges as they are also market makers subject to some of the list of cost mentioned above.  One point of note is that Market Making technology is quite sophisticates and very expensive.  It has driven most of wholesale market makers of the 90s into consolidation.    Retail routing firm's save a significant amount of money for not having to operate such a system (as well as worry about the regulatory headaches associated with running such a system).  This allows them to provide much lower commissions that the (full service) or bulge bracket brokers. In simple terms, this is how the shares are traded, however most of the times market orders are placed. Consider below scenario( hypothetical scenario, there are just 2 traders) Buyer is ready to buy 10 shares @ 5$ and seller is ready to sell 10 shares @ 5.10$, both the orders will remain in open state, unless one wish to change his price, this is an example of limit order. Market orders If seller is ready to sell 10 shares @ 5$ and another 10 shares @5.05$, if buyer wants to buy 20 shares @ market price, then the trade will be executed for 10 shares @ 5$ and another 10 shares @ 5.05$