Fig. 1.

A random process model of the continuous double auction. Stored limit orders are shown stacked along the price axis, with sell orders (supply) stacked above the axis at higher prices and buy orders (demand) stacked below the axis at lower prices. New sell limit orders are visualized as randomly falling down, and new buy orders are visualized as randomly “falling up.” New sell orders can be placed anywhere above the best buying price, and new buy orders can be placed anywhere below the best selling price. Limit orders can be removed spontaneously (e.g., because the agent changes her mind or the order expires), or they can be removed by market orders of the opposite type. This can result in changes in the best prices, which in turn alter the boundaries of the order placement process.