hard · Market Microstructure lob
Consider a limit order book (LOB) for XYZ at a single price level of $50.00 with the following resting sell orders in chronological order: Order A for 800 shares, Order B for 400 shares, and Order C for 300 shares.
If a market buy order for 1,000 shares is submitted, what is the exact difference in the allocation received by Order B when comparing a Price-Time (FIFO) matching engine to a pure Pro-Rata matching engine?
- Order B receives 200 fewer shares under Pro-Rata than under FIFO.
- Order B receives 66.67 more shares under Pro-Rata than under FIFO.
- Order B receives the same 400 shares under both algorithms.
- Order B receives 133.33 more shares under FIFO than under Pro-Rata.
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