hard · Market Microstructure
A trader posts a hidden (fully iceberg-concealed) limit buy at the best bid on a U.S. equity exchange that uses strict price-time priority but ranks displayed orders ahead of hidden orders at the SAME price. A second trader posts a DISPLAYED limit buy at that identical price one millisecond later. An incoming marketable sell then arrives that can fill only one of the two.
Which order executes, and what is the governing principle?
- The displayed order fills first, because at a given price level displayed liquidity is granted priority over earlier-posted hidden liquidity, so time priority is subordinated to display priority within the level
- The hidden order fills first, because it arrived earlier and strict time priority always dominates regardless of an order's display status at the price level
- The hidden order fills first, because exchanges reward non-displayed liquidity with a priority bonus to compensate for its lack of execution certainty
- The displayed order fills first, because the later order improves the price and price priority outranks the earlier hidden order resting at the same level
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