Pro-Rata Matching
Market Microstructure glossary · Limit Order Book Mechanics & Order Routing Logic
Definition
An order matching rule in which incoming orders are allocated among resting orders at the same price in proportion to each resting order's size, rather than by time priority.
Pro-Rata Matching in plain English
Imagine ten people are all waiting to sell lemonade at the exact same price, and a buyer shows up wanting to buy just a few cups. Pro-rata matching says: instead of giving the whole order to whoever got in line first, split the sale among all the sellers in proportion to how much each one is offering. So a seller offering 100 cups gets ten times as much of the order as one offering 10 cups. It's an alternative to 'first-come-first-served' (time priority), and it rewards posting a big order rather than posting early.
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