How Stock Prices Are Set — Quotes and Execution
Who sets the stock price? In fact, there is no one in the market who sets the price. The moment a buyer's and a seller's quotes meet, the stock price is born.
What Is a Quote?
A quote is the price I call out, saying "I'll buy or sell at this price."
The price a buyer calls is the bid, and the price a seller calls is the ask. On a brokerage app's order book, the asks are stacked at the top and the bids at the bottom, layer by layer.
For example, if someone says "I'll buy this stock at 10,000 KRW" and someone else says "I'll sell at 10,100 KRW," the prices don't yet match, so no trade happens.
Execution — the Moment Prices Meet
The moment the bid and ask become equal, or the buying price rises above the selling price, the trade is completed. This is called "execution," and the price at that moment becomes the "current price" we see.
In the example above, if the buyer raises the quote to "I'll buy even at 10,100 KRW," it meets the ask of 10,100 KRW and executes. This 10,100 KRW becomes the new current price.
In other words, a stock price is not set by any institution; it is simply the last price at which a trade was actually made at each moment.
Who Gets Executed First — the Price-Time Priority Rule
When orders pile up on the same stock, an order is needed. The Korea Exchange sets the order by two principles.
First, price priority. When buying, orders willing to pay more are executed first; when selling, orders willing to sell for less are executed first. This makes trades easier to complete.
Second, time priority. If the prices are the same, the order placed earlier is executed first. Korea receives orders in units of a thousandth of a second to determine the order.
Price-priority and time-priority principles. (Source: Easy-to-Find Everyday Legal Information, "trading principles"; Korea Exchange individual competitive auction)
Trading Isn't Possible at Just Any Time
The regular trading hours for Korean stocks are weekdays from 9:00 a.m. to 3:30 p.m. It's the same for KOSPI, KOSDAQ, and KONEX.
Before the open (8:30–9:00) and just before the close (15:20–15:30), a "simultaneous quote (single-price)" method is applied, gathering orders and executing them at once at a single price to set the opening and closing prices.
On the order book, the gap between the best ask and the best bid is called the "spread," and the narrower this gap, the more active the trading (the higher the liquidity) and the easier it is to execute at your desired price.
Regular session 09:00–15:30, opening and closing set via simultaneous quotes. (Source: Easy-to-Find Everyday Legal Information, "trading hours")
Preguntas frecuentes
Q. Why isn't my order getting executed?
Because there is not yet a matching opposite quote at the price you specified (someone willing to sell at the price you want to buy). A limit order guarantees the price you want, but in exchange, if the market price doesn't reach that point, it may not be executed.
Q. Why do the numbers on the order book keep changing?
Because at every moment new buy and sell orders come in and existing orders are executed or canceled. The order book is a screen that shows in real time "the pending volume of people wanting to buy and sell at this price right now," so it moves constantly.
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