hard · Market Microstructure lob
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.
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