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
Date Written: December 17, 2013
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: Suggested Citation