Optimal Order Size in Pro-Rata Markets

The Journal of Trading Spring 2014, Vol. 9, No. 2: pp. 43-50 DOI: 10.3905/jot.2014.9.2.043

Posted: 7 Jan 2014 Last revised: 12 Apr 2014

See all articles by Irene Aldridge

Irene Aldridge

AbleMarkets.com; Cornell University; BigDataFinance.org; ABLE Alpha Trading, LTD

Date Written: December 17, 2013

Abstract

Several exchanges in futures and options deploy pro-rata matching. The executed size of limit orders in pro-rata markets is never certain, unlike in price-time priority matching systems. This article derives the optimal size of limit orders in pro-rata markets given the trader’s desired execution size.

Keywords: market microstructure, pro-rata, futures, options, optimal execution

JEL Classification: G10, G13, G11, G12

Suggested Citation

Aldridge, Irene, Optimal Order Size in Pro-Rata Markets (December 17, 2013). The Journal of Trading Spring 2014, Vol. 9, No. 2: pp. 43-50 DOI: 10.3905/jot.2014.9.2.043. Available at SSRN: https://ssrn.com/abstract=2375862 or http://dx.doi.org/10.2139/ssrn.2375862

Irene Aldridge (Contact Author)

AbleMarkets.com ( email )

New York, NY 10128
United States

HOME PAGE: http://www.AbleMarkets.com

Cornell University ( email )

Ithaca, NY 14853
United States

BigDataFinance.org ( email )

United States

ABLE Alpha Trading, LTD ( email )

New York, NY 10004
United States

HOME PAGE: http://www.ablealpha.com

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