hard · Market Microstructure hft

Under strict price-time priority, what determines how many firms fill and what share of those 500 shares each receives, and what does this imply for the economics of the latency race?

1. All 1,000 firms fill proportionally, receiving 0.5 shares each, because the exchange's matching engine pro-rates order fills whenever multiple orders are logged as arriving at exactly the same microsecond timestamp, splitting the available liquidity evenly across every participant present, regardless of true arrival order or queue position.
2. Only the firm(s) whose orders arrive first at the matching engine fill; they receive up to 500 shares in arrival order. Firms arriving later find the liquidity exhausted. This implies that the marginal value of sub-microsecond latency improvements is very high — winning the race by even 1 microsecond means the difference between filling and not filling.
3. The 500 shares are allocated to the 10 fastest firms at 50 shares apiece, determined by the exchange's co-location service-level agreement tier rather than by exact matching-engine arrival timestamps, since firms paying for premium proximity access are contractually guaranteed proportionally larger fill allocations under that tiered co-location pricing structure.
4. All 1,000 firms fill 0.5 shares each because Reg NMS requires equal access among co-located subscribers, meaning the exchange must distribute any available liquidity at a stale quote evenly across every firm that submitted a qualifying order within the same round-trip latency window, regardless of the precise arrival sequence that was actually recorded.

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