The First Trade¶

Objective¶

Execute your first buy and sell trades against the market-maker quotes and understand fill messages, clearing records, order IDs, and the order book lifecycle.

Prerequisites¶

Engine and scheduler running from chapters 01–02.
MM liquidity running from chapter 02 (manual MM gateways or pm-mm-bot).
TRADER01 gateway connected.
One spare terminal for the clearing process.

Exercise 1: Start Clearing¶

In a new terminal, start the clearing process before you trade:

pm-clearing

pm-clearing subscribes to executed trades, updates per-gateway positions and P&L, and appends trades to clearing_report.csv in the data directory. Leave it running while you work through this chapter.

Checkpoint: clearing is running and waiting for trades.

Exercise 2: Buy at Market — Lift the Ask¶

From TRADER01, send a market buy order for AAPL:

TRADER01> NEW|SYM=AAPL|SIDE=BUY|TYPE=MARKET|QTY=100

Expected output:

[FILL] order_id=... AAPL BUY 100@150.05 status=FILLED

The order matched against the MM's ask at 150.05.

Now switch to the pm-clearing terminal. You should see the trade reflected in the clearing output: TRADER01 has bought AAPL, the market-maker gateway has sold AAPL, and positions/P&L are updated from the execution price.

Checkpoint: you received a fill confirmation and can see the trade in pm-clearing.

Exercise 3: Sell at Market — Hit the Bid¶

TRADER01> NEW|SYM=AAPL|SIDE=SELL|TYPE=MARKET|QTY=100

Expected output:

[FILL] order_id=... AAPL SELL 100@149.95 status=FILLED

Checkpoint: sell fill at the bid price.

Exercise 4: Place a Limit Buy Order¶

Place a buy order below the current bid — it should rest on the book:

TRADER01> NEW|SYM=AAPL|SIDE=BUY|TYPE=LIMIT|QTY=200|PRICE=149.80|TIF=DAY

Expected: order acknowledged, status=NEW (resting).

Verify with:

TRADER01> BOOK|SYM=AAPL

You should see your 200-lot bid at 149.80 below the MM's bid.

Checkpoint: limit order visible in the book.

Exercise 5: Place a Limit Sell and Get a Fill¶

Now from TRADER02 (open a second gateway if not already):

pm-alf-console --id TRADER02

TRADER02> NEW|SYM=AAPL|SIDE=SELL|TYPE=LIMIT|QTY=50|PRICE=149.80|TIF=DAY

This sell crosses TRADER01's resting bid at 149.80 → immediate fill.

Both gateways receive fill notifications:

TRADER01: partial fill (200→150 remaining)
TRADER02: full fill (50 filled)

Checkpoint: cross-gateway fill confirmed on both sides.

Exercise 6: Check Order State¶

From TRADER01, inspect the partially filled order:

TRADER01> ORDERS

Expected: the order from Exercise 4 appears with filled and remaining quantity showing the partial fill.

Checkpoint: ORDERS shows partial fill state correctly.

Optional: If you have pm-viewer running on AAPL, you should see the bid size drop from 200 to 150 after the fill.

Exercise 7 (Optional): Observe Automatic Re-Quoting with pm-mm-bot¶

If you are running pm-mm-bot for AAPL (instead of manual quoting), your market order in Exercise 2 should trigger automatic re-quoting. Run BOOK again:

TRADER01> BOOK|SYM=AAPL

The MM should have a fresh two-sided quote (possibly at a slightly different mid if the trade moved the reference price).

Checkpoint: MM has re-quoted after being filled.

Key Concepts Learned¶

Market orders execute immediately against the best available price.
Limit orders rest on the book until a matching counterparty arrives.
Fills generate fill messages to both buyer and seller.
Clearing consumes executed trades and turns them into positions and P&L.
Partial fills leave the remainder resting.
Order IDs are used for AMEND and CANCEL operations.

Reflection¶

Why does a MARKET order carry no PRICE field at all, while a LIMIT order requires one? What risk would a MARKET order expose you to in a thin book that a LIMIT order would protect you from?