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Market structure · Explainer

What a price really costs.

The number on the screen is the last trade. What you would pay depends on the orders behind it. A hands-on guide to reading an order book.

FForeseez ResearchOct 15, 20267 min read
636465666768626160595857 62¢ BIDS · BUYERSOFFERS · SELLERS
01

The price is a ladder, not a number

A market quoting 62% is really two lists. One is people offering to sell YES at 63¢, 64¢, 65¢ and up. The other is people bidding to buy at 62¢, 61¢ and down. The number you see is usually the last trade, or the midpoint between the best bid and the best offer.

Click any rung below to see what it would take to trade that far up or down the ladder.

FIGURE 1 · THE LADDEROne market, two venues, two very different ladders
Bids, contractsPriceOffers, contracts
Best bid / offer62 / 63¢Bid-ask spread1¢
BUY UP TO 65¢You could buy 15,000 contracts by taking every offer up to 65¢. Average price 64.3¢.
Bars show resting size at each price. Venue names hidden; sample order books.

The gap between the best bid and the best offer is the bid-ask spread. On a deep venue it might be a cent. On a thin one it can be three or more. Either way, buy right now and you pay the offer, not the midpoint.

02

Walk the book

Small orders fill at the best offer. Bigger ones eat through it and keep climbing, filling at worse and worse prices. The average you pay drifts up with size, and how fast it drifts depends on how much is resting on the book. Drag the size and watch both ladders get eaten.

FIGURE 2 · WALK THE BOOKBuy 10,000 contracts of YES
[Venue A]deep book
63¢3,000 / 3,000
64¢5,000 / 5,000
65¢2,000 / 7,000
66¢8,000
67¢9,000
68¢9,000
69¢10,000
70¢10,000
71¢11,000
72¢12,000
Average fill63.9¢Last fill65¢vs screen 62¢+1.9¢
[Venue C]thin book
62¢400 / 400
63¢600 / 600
64¢900 / 900
65¢1,200 / 1,200
66¢1,500 / 1,500
67¢1,800 / 1,800
68¢2,000 / 2,000
69¢1,600 / 2,200
70¢2,400
71¢2,600
Average fill66.4¢Last fill69¢vs screen 62¢+4.4¢

The deep venue fills at 63.9¢ on average, the thin one at 66.4¢. Same market, same moment, 2.5¢ apart per contract.

Filled orange is the part of each offer your order would take. Sample order books; venue names hidden.

The same 10,000 contracts cost about 64¢ each on the deep venue and more than 66¢ on the thin one. That difference is invisible if all you compare is the headline number.

03

Depth at a glance

Traders often view the book as a depth chart: the total size available as you move away from the price. Steep walls mean a market that can absorb size. Gentle slopes mean every contract you buy moves the price.

FIGURE 3Two walls, one gentle slope
Deep venueThin venue
020k40k60k80k your order: 10,000 5254565860626466687072 price, cents
Height is the total contracts available from the middle out to each price. The dots show how far up the offers your order from Figure 2 would reach on each venue. Sample data.
04

Fees close the loop

Last, fees. Some venues charge per contract, some take a share scaled to the price, some charge nothing to trade and make it up elsewhere. Add them to the walk and the cheapest headline price is not always the cheapest place to trade.

FIGURE 4All-in cost per contract, 10,000 contracts
Uses the order size from Figure 2
60¢62¢64¢66¢68¢70¢72¢74¢ [Venue A]deep book · 1¢ per contract64.9¢ cheapest[Venue B]medium book · scaled to price66.3¢[Venue C]thin book · no trading fee66.4¢ cents per contract
best offerwalking the bookfees

[Venue C] shows the lowest offer, but [Venue A] is cheapest once you walk the book and add fees: 64.9¢ per contract.

Sample order books and sample fee schedules, not any venue's actual fees. Axis starts at 60¢.

Foreseez is read-only: we do not route or place orders. But every event page can show a cost-to-trade estimate for each venue at a size you choose, so the number you compare is the number you would actually pay.

Order books and fees in this post are sample data, not any venue's real book or fee schedule. Nothing here is investment advice.