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1.2 How US Stock Prices Form: Order Books & Exchanges
From the order book to the consolidated quote: how one stock trades across many venues, and when the US session falls in India.
About this lecture
The price on your chart, the price you can buy at, and the price you can sell at are not necessarily the same. So how does a US stock price actually form?
Pratham starts with the order book, then follows price formation across exchanges, auctions and trading sessions.
You'll learn about:
- Bid, ask, spread and the last traded price
- How the same stock trades across multiple exchanges
- The NBBO and how quotes are consolidated
- Dark pools, wholesalers and different trading venues
- Opening and closing auctions, trading halts and price bands
- US market hours in IST and the daylight-saving shift
- The 11 market sectors and their exposure to growth, interest rates and currencies
This lecture connects the numbers on your screen to the structure behind them, preparing you to understand how economic news reaches individual stocks.
Educational content only. Not investment advice.
Key takeaways
- The chart's price, the price you can buy at and the price you can sell at are three different numbers: the last trade, the ask and the bid.
- One stock trades on many exchanges and in dark pools and wholesalers; the NBBO consolidates every venue's best quote into one.
- Opening and closing auctions, halts and price bands shape the edges of the session; the US session lands in the Indian evening and shifts by an hour with daylight saving.
- The eleven market sectors differ in how they respond to growth, interest rates and currencies.