6533b838fe1ef96bd12a3ae4

RESEARCH PRODUCT

Price-Time Priority and Pro Rata Matching in an Order Book Model of Financial Markets

Tobias PreisTobias Preis

subject

MicroeconomicsActuarial sciencePro rataOrder (exchange)Ask priceMatching principleFinancial marketEconomicsOrder bookVolatility (finance)Limit price

description

Using our recently introduced order book model of financial markets we analyzed two different matching principles for order allocation — price-time priority and pro rata matching. Price-time priority uses the submission timestamp which prioritizes orders in the book with the same price. The order which was entered earliest at a given price limit gets executed first. Pro rata matching is used for products with low intraday volatility of best bid and best ask price. Pro rata matching ensures constant access for orders of all sizes. We demonstrate how a multiagent-based model of financial market can be used to study microscopic aspects of order books.

yearjournalcountryeditionlanguage
2011-01-01
https://doi.org/10.1007/978-88-470-1766-5_5