"Make The Market" - Limit Buy Order

CFA Level I Equities
#1

Hi,

Regarding the section on limit buy orders, if the limit price is set at the bid price, we have “make the market”.

I understand if I set the price between bid and ask, I am attracting the sellers to sell to me below the ask price.

What does it mean if I set it the bid price?

Thanks!

#2

It means you are joining the rest of the buyers who are ready to buy the stock at the bid price. However, the person who placed the earlier order will have precedence in having their order filled, and only then you can have your order filled.