In this workout, we are asked to use the information in the order book below and calculate the average price that will result from the given order. Looking at the existing order book, we have got the buy orders on the left hand side. We've got size and price, and the orders are arranged from high to low price. On the right hand side, we have the sell orders arranged from low to high price.

The order type that we have is a market order. It is a buy order, and the size is for 3,000 shares.

Remember, with a market order, the price is not guaranteed. However, as long as they are sufficient unmatched orders in the order book, execution is guaranteed.

To work out the average trade price, we first need to work out the value of the total trade. Then we can divide by the total number of shares traded to come up with the average trade price. With a market order, the trade is executed using the best prices first. As this is a buy order, we need to look at the unmatched sell orders in our order book, and the best selling prices are the lowest ones for the buyer, and that's why the order book is arranged from low to high when looking at the sell orders. So we're gonna start off executing this trade by buying 1,000 shares at a price of 93.5.

We wanna buy a total of 3,000 shares, so we're going to buy a further 750 at a price of 93.9.

We see that the next unmatched sell order is for a block of 5,000 shares. Now, we don't need to buy the full 5,000 because we only want to buy 3,000 shares, and we've already bought 1,750, so the calculation I'm gonna do next is to work out how many shares of that 5,000 we need to buy. So I'm gonna take 3,000, which is our total order size, and subtract the 1,000 and the 750 that we have already bought, and that leaves us with the number of shares that we need to buy at a price of 94.

What we have here is not the average trade price. It is the total order value, so the last thing we need to do to get the average trade price is divide that by the number of shares traded, which is 3,000. So I'm just gonna put brackets around the entire calculation.

What we have here is the total order value, not the average trade price. So to get the average trade price, I need to divide by the number of shares traded, which is 3,000. So I'm just gonna go back into my formula. I'm gonna put brackets around everything that we've done so far, and then I'm going to divide by the 3,000 shares we bought, and that gives us an average trade price of 93.8 per share.

Finally, we are asked for the number of unmatched shares. As this was a market order and there was sufficient depth in the market, there were enough unmatched sell orders in the order book, we executed the full trade. We bought 3,000 shares and so there are zero unmatched shares. This is in contrast to a limit order, where the price of the limit order is guaranteed, but the volume of the trade is not. So with a limit order, you could end up with a number of unmatched shares.