Orders on Electronic Markets

Every order type so far behaves the same whether a floor broker or a computer handles it. This section covers where those orders actually live today: the electronic order book, and the one twist it adds to how a stop is triggered.

The Electronic Marketplace

Futures trading has moved from the trading pit to the screen, and the order book is now electronic.

• Electronic trading platforms: most futures now trade on electronic platforms (for example, Chicago Mercantile Exchange (CME) Globex) that have replaced most open-outcry pit trading. Orders are entered, matched, and confirmed electronically rather than by floor brokers shouting in a pit.
• Central limit order book (CLOB): resting bids and offers are collected in a central limit order book, and matched by price-time priority: the best price fills first, and among orders at the same price, the one entered earliest fills first.
• Access and hours: electronic markets offer near-24-hour access, high transparency, and speed, letting participants around the world trade the same order book.

Think of it this way: a central limit order book is a single, shared queue that everyone joins from anywhere. Price gets you to the head of the line first (the best-priced order is served before worse-priced ones), and among people offering the same price, whoever showed up earliest is served first. It is a first-come-first-served line, but the best price always jumps to the front.

Exam Tip: Gotchas

• Price-time priority means best price first, then earliest time. Among orders at the same price, the earlier one fills first. A larger order does not jump the queue on size alone, so do not assume the biggest order or the newest order gets filled first.

Native vs. Synthetic Stop Orders

The electronic marketplace adds one distinction to the stops from the earlier sections: who watches for the trigger.

• Native stop order: a stop held and triggered by the exchange's own match engine. The exchange watches the market and elects (triggers) the stop, so the trigger does not depend on the broker's system being online.
• Synthetic (broker-simulated) stop order: a stop held and monitored by the broker or trading platform, which submits the underlying order to the exchange only once its own systems see the trigger price. Its behavior depends on the broker's connection and monitoring.
• Why it matters: the same stop direction and becomes-a-market-order mechanics from the earlier sections apply either way. What changes is only who does the triggering, the exchange or the broker.

Exam Tip: Gotchas

• A stop can be native (elected by the exchange match engine) or synthetic (simulated by the broker). The placement and "becomes a market order when triggered" behavior are the same; only where the trigger lives changes. Do not assume every electronic stop is guaranteed or held by the exchange.