hard · Market Microstructure
On an exchange using price-time priority, 50 co-located HFT firms all submit new limit orders to the same price level at the same instant in response to a quote update.
Which statement best describes the queue dynamics and the resulting latency race?
- All 50 firms receive equal fills because co-location guarantees identical latency for all subscribers.
- The firm whose order arrives at the matching engine first (lowest network and processing latency) obtains the best queue position; the remaining firms queue behind it in arrival order, creating an arms race in hardware and proximity investments.
- Fill priority at the same price level is random under Reg NMS, so queue position provides no systematic advantage.
- The firm with the largest order size at the same price level receives priority, making capital size the dominant factor over latency.
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