hard · Market Microstructure
An exchange offers a 'hide-not-slide' style repricing for displayed orders. The NBBO is bid $15.00 / ask $15.01 (one-tick spread). A trader posts a displayed buy limit at $15.01 (locking the market). The venue reprices it to a non-displayed ranked price of $15.00 but ranks it as if at $15.01 for priority purposes, sliding it back to $15.01 only if the locking offer leaves. A second trader then posts a displayed buy at $15.00 a moment later.
When the $15.01 offer is cancelled (unlocking the book), which buy order trades first against the next incoming marketable sell, and why?
- The first trader's repriced order executes first because it retains hidden priority at the $15.01-equivalent rank from its original timestamp and slides up to $15.01 ahead of the later $15.00 displayed bid.
- The second trader's $15.00 displayed order executes first because displayed liquidity always outranks any hidden or repriced order regardless of timestamp.
- Both orders are now at $15.00 once unlocked, so allocation is by displayed-size pro-rata between them irrespective of arrival order.
- The first trader's order is cancelled on unlock because hide-not-slide orders expire when the lock that triggered them resolves, leaving the $15.00 order to trade first.
Sign up free to see the explanation and track your rank →
More Market Microstructure practice
- A stock is quoted at $50.00 bid x $50.10 ask. A buyer submit… — How does this action affec
- A stock is trading at $100.00. The Level 1 S&P 500 Market-Wi… — What is the status of trad
- If the stock price drops instantly from $50.05 to $49.00 in a 'flash crash,' what happens
- Under the National Market System (Reg NMS), if Exchange A is quoting a stock at $10.00 x
- If the stock gaps down and opens at $69.50 on Tuesday morning, at what price will the trad
- If the dealer uses a quote shading parameter of κ = 0.00004 to manage inventory, what is t
- A trader places a large sell order for 50,000 shares at $50.01 only to cancel it immediate
- Using the Lee-Ready algorithm, how should a trade occurring at $50.10 following a $50.00 t