Pro-rata matching and one-tick futures markets

  • We find and describe four futures markets where the bid-ask spread is bid down to the fixed price tick size practically all the time, and which match counterparties using a pro-rata rule. These four markets´ offered depths at the quotes on average exceed mean market order size by two orders of magnitude, and their order cancellation rates (the probability of any given offered lot being cancelled) are significantly over 96 per cent. We develop a simple theoretical model to ex- plain these facts, where strategic complementarities in the choice of limit order size cause traders to risk overtrading by submitting over-sized limit orders, most of which they expect to cancel.

Download full text files

Export metadata

Additional Services

Share in Twitter Search Google Scholar
Author:Jonathan Field, Jeremy Large
Parent Title (German):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2008,40
Series (Serial Number):CFS working paper series (2008, 40)
Document Type:Working Paper
Year of Completion:2008
Year of first Publication:2008
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2009/01/29
Tag:Bid-Ask Spread; Depths; Limit Order Book; Pro-Rata; Tick Size
Institutes:Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht