Warning. This is not an authoratative or complete reference. These are some WIP notes loosely based on the following sources:
- Financial Trading and Investing (John Teall, 2022).
|Constructing the LOB from L3 Data|
A limit order book is a summary of all outsanding orders in a given financial market.
Market participants send buy and sell orders to an exchange. These are instructions to buy or sell a security for no greater than some given quantity for a price no worse than some given price. These are sometimes called limit orders because the quantity / price specifed in the order are. Any participant interacting directly via an exchange do so via buy orders.
It the exchange's responsibility to match buy and sell orders togetherin such a way that both limits are respected