hard · Market Microstructure
If a market uses a Pro-Rata matching engine rather than Price-Time Priority (FIFO), how might the permanent impact of a large metered order be affected if parasitic traders are present?
- Permanent impact will decrease because pro-rata engines naturally widen the spread to discourage informed traders.
- Permanent impact may increase because parasitic traders can more easily gain fills alongside the large order by posting large sizes.
- Permanent impact will decrease because parasitic traders cannot jump ahead in the queue based on speed.
- Permanent impact is unaffected because matching engine rules only influence temporary impact.
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